The Toronto Blue Jays baseball team plays in Major League Baseball’s American Le

Question

The Toronto Blue Jays baseball team plays in Major League Baseball’s American League. The Blue Jays are owned by a Canadian firm and of course play their home games in Toronto, but play all of their away games in the United States and thus must pay travel and lodging expenses for the team in U.S. dollars. The Blue Jays must also pay their players (a total of well over $100 million for the whole team) in U.S. dollars. Were the owners of the Blue Jays happier when the Canadian dollar was exchanging for $0.66 U.S., or when the Canadian dollar rose in value against the U.S. dollar and was exchanging for $.90?

Explanation / Answer

Given 1 canadian dollar = 0.66 US dollar OR Us 1$ = 1/0.66 = 1.515 Cannadian $.

Canada pays $100 million which is worth = 100 million*1.515 = $151.515 million US.

Now exchange rate is 1 canadian dollar = 0.90 US dollar OR $1 US = 1/0.90 = 1.11 Canadian $.

then, 100 million Canadian dollar woul now be = 100*1.11 = $111.111 million US dollar.

Thats why Blue jays would be happier when exchange rate was 1Canadian dollar is equal to $0.66 US dollar.

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