Suppose that the Brazilian real devalues by 40% against the U.S.dollar.By how much will the dollar appreciate against the real?
A)67%
B)40%
C)32%
D)28%

Question

Quizplus · Accepted Answer

If the Brazilian real devalues by 40% against the U.S. dollar, it means that you now need 40% more reals to buy the same amount of dollars. To find out by how much the dollar appreciates against the real, you can use the formula for percentage increase, which is (New Value - Original Value) / Original Value * 100%. If the original value is 1 (representing a 1:1 ratio for simplicity), and it devalues by 40%, the new value becomes 1.4. The appreciation of the dollar is then (1.4 - 1) / 1 * 100% = 40%. However, to directly calculate how much more valuable the dollar has become in terms of the real, you consider the inverse of the devaluation. If 1 dollar was worth 1 real and now is worth 1.4 reals, the calculation is 1 / (1 - 0.4) = 1.67, indicating a 67% increase in value from the perspective of the real.

Suppose That the Brazilian Real Devalues by 40% Against the U.S.dollar.By