If the exchange rate between the Australian dollar and the British pound (the price of the Australian dollar in terms of the pound) is currently 1.50, and is expected to be 1.80 in one year, then the expected rate of:
A) appreciation of the Australian dollar is 15%.
B) appreciation of the Australian dollar is 20%.
C) depreciation of the Australian dollar is 15%.
D) appreciation of the Australian dollar is 18%.
E) depreciation of the Australian dollar is 20%.

Question

Quizplus · Accepted Answer

To calculate the expected rate of appreciation of the Australian dollar, we need to use the following formula:

Expected appreciation rate = (New exchange rate - Old exchange rate) / Old exchange rate x 100%

Plugging in the numbers, we get:

Expected appreciation rate = (1.80 - 1.50) / 1.50 x 100% = 0.30 / 1.50 x 100% = 20%

Therefore, the expected rate of appreciation of the Australian dollar is 20%, which is option B.

If the Exchange Rate Between the Australian Dollar and the British