Question

Assume an exchange rate of $1 = .60 british pounds. a u.s. product sells in britain for 18 pounds. by what percentage will dollar revenues change if the dollar price of a pound falls to .50 pounds?

Answer 1

18 x .6 = $10.80 US 18 x .5 = $9.00 US 9/10.80 = .83 1 - .83 = 17% change You first multiply the price in pounds by the exchange rate to find out how much the product would cost in US dollars. Then the same calculation is done with the lower exchange rate. You create an equation with the 2 US dollar amounts. Then to get the percent change, you subtract that answer from 1.