Question

If a Japanese DVD player priced at 12,000 yen can be purchased for \(\$ 60\), the exchange rate is a) 200 yen per dollar d) 200 dollars per yen b) 20 yen per dollar e) none of the above c) 20 dollars per yen

Short answer

The correct exchange rate is a) 200 yen per dollar.

Step-by-step solution

Identify the Given Information

We have the following information: - Cost of DVD player in yen: 12,000 yen - Price of DVD player in dollars: $60 - Possible exchange rates (options a, b, c, and d)

Find the Proper Exchange Rate

To find the proper exchange rate, we must determine how many yen are equivalent to one dollar. We can use the formula: Exchange rate = Cost in yen / Price in dollars

Calculate the Exchange Rate

Now let's calculate the exchange rate using the given information: Exchange rate = \(12,000 \text{ yen}\) / \(\$60\) Exchange rate = \(200 \text{ yen per dollar}\)

Match the Calculated Exchange Rate to the Answer Choices

Now, we need to find which option matches the calculated exchange rate: a) 200 yen per dollar - This matches our calculated exchange rate. b) 20 yen per dollar - This does not match our calculated exchange rate. c) 20 dollars per yen - This does not match our calculated exchange rate, and it's not a reasonable rate since it's giving a higher dollar value to a single yen. d) 200 dollars per yen - This does not match our calculated exchange rate, and it is also not a reasonable rate for the same reason as option c. From the above analysis, we can see that only the first option (a) matches our calculated exchange rate.

Write the Final Answer

Thus, the correct answer is: a) 200 yen per dollar

Key concepts

Currency Conversion

Currency conversion is a fundamental concept in the world of international finance. It refers to the process of exchanging one currency for another. This is crucial for conducting business transactions across countries, as different countries have their respective currencies.
When converting currencies, the exchange rate plays a vital role. An exchange rate is the value of one currency in terms of another. It determines how much of one currency is needed to purchase a fixed amount of another currency. For instance, if you have dollars and wish to purchase Japanese yen, you'll use the exchange rate to determine how many yen you can get for your dollars.

This rate varies constantly due to various factors such as economic performance, geopolitical stability, and market speculation. Exchange rates are typically quoted in pairs, like USD/JPY (United States Dollar/Japanese Yen), providing the value of the first currency in terms of the second. Understanding these conversions is crucial for international travel, import-export businesses, and foreign investments.
To convert currency effectively, it’s essential to:

• Know the current exchange rate between the currencies in question.
• Calculate the value using mathematical formulas or online currency calculators.
• Consider any fees or charges that might be applied for the conversion process.

Yen to Dollar

Converting yen to dollar involves understanding the specific exchange rate between the Japanese Yen (JPY) and the United States Dollar (USD). This exchange rate will tell you how many yen are equivalent to one dollar.

For example, as demonstrated in the exercise, if a product costs 12,000 yen and can be bought for $60, the exchange rate is calculated by dividing the yen cost by the dollar price:\[ \text{Exchange rate} = \frac{12,000 \text{ yen}}{60 \text{ dollars}} = 200 \text{ yen per dollar}\]This rate signifies that for every dollar, you will receive 200 yen.
It’s important to observe that exchange rates can fluctuate beyond the basic calculation. Market conditions, international trade agreements, and other economic indicators can cause these rates to change. Travelers and businesses operating internationally often keep a close eye on these rates to make informed financial decisions.
In everyday usage, such conversions allow people to:

• Plan travel budgets efficiently by knowing how much their home currency will get them abroad.
• Understand the price changes in imported goods that might result from exchange rate fluctuations.

International Finance

International finance encompasses the financial relationships that exist between countries. It's a branch of economics and finance that focuses on topics like exchange rates, international investing, and the global financial system.
One significant aspect of international finance is managing currency risk. Currency exchange rates can fluctuate, impacting the profits and losses of international transactions. For businesses, understanding these fluctuations is critical to mitigate risks associated with foreign exchange.

International finance includes multiple participants, from multinational corporations to individual investors. Each interacts within global markets, making buying and selling decisions with considerations towards current economic conditions and future financial forecasts:

• Corporations: Engage in cross-border mergers or acquisitions.
• Investors: Buy foreign securities like stocks and bonds to diversify their portfolios.
• Governments: Participate by regulating their own currencies and through foreign exchange market interventions.

Understanding international finance allows companies and individuals to navigate foreign markets more effectively, make informed decisions, and strategically engage in international trade and investment.