Results of exchange rate changes Early in September 1983, it took 275 Japanese y

Question

Results of exchange rate changes

Early in September 1983, it took 275 Japanese yen to equal $1. Nearly 28 years later, in August 2011, that exchange rate had fallen to 105 yen to $1. Assume that the price of a Japanese-manufactured automobile was $9,000 in September 1983 and that its price changes were in direct relation to exchange rates.

Has the price, in dollars, of the automobile increased or decreased during the 28-year period because of changes in the exchange rate?

Increase or Decrease

What would the dollar price of the automobile be in August 2011, again assuming that the car's price changes only with exchange rates? Round your answer to the nearest cent.
$  

Explanation / Answer

Base year = 1983

Base year exchange rate: 1$ = 275 Japanese Yen

Current year = 2011

Current year exchange rate: 1$ = 105 Japanese Yen

Price of automobile in 1983 = $9000

Price of automobile in 2011 = 9000/275 * 105 = $3436

Thus, the price in dollars of the automobile has decrease during the 28-year period because of changes in exchange rates.

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