CIMA BA1 · Chapter 3 · Question 6 of 10
A Ruritanian exporter sells a machine priced at RK50,000. The exchange rate moves from RK1 = $0.80 to RK1 = $0.72. What is the dollar price of the machine to an American buyer after the change?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $36,000
Explanation
Dollar price = krona price x dollars per krona = RK50,000 x 0.72 = $36,000. Before the change it was RK50,000 x 0.80 = $40,000, so the depreciation has made the export cheaper to the buyer.
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