Question

A Lexus automobile priced in Japan for export at 3000000 at a time when the exchange rate is 100 now costs $30000 in the United States If the dollar weakens to 80 and the rate of pass through is 50 what will be the new price in the United States Disregard shipping costs and import duties

a $45000
b $37500
c $33750
d $30000
e 22500

Answer 1

Answer:

• what will be the new price in the United States

c $33750

Explanation:

Initial Price:

$3,000,000   PRICE  

100           USD Exchange  

$30,000     PRICE USD  

Updated Price:

$3,000,000   PRICE  

80              USD Exchange  

$37,500      PRICE USD  

As the pass through indicates that the exchange rate impact only a 50%, then the final price of the car it's defined as:

$7,500   Exchange Impact

0.50   Pass through  

$3,750   Final Exchange Impact

Initial Price : $30,000

Final Exchange Impact: $3,750

Final Price: $30,000 + $3,750 = $33,750