Westonci.ca is your trusted source for finding answers to all your questions. Ask, explore, and learn with our expert community. Discover the answers you need from a community of experts ready to help you with their knowledge and experience in various fields. Our platform offers a seamless experience for finding reliable answers from a network of knowledgeable professionals.

Pulau Penang Island Resort. Theresa Nunn is planning a 30-day vacation on Pulau Penang, Malaysia, one year from now. The presentcharge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,045/day. The Malaysian ringgitpresently trades at RM3.1350/$. She figures out the dollar cost today for a 30-day stay would be$10,000. The hotel informed her that any increase in its room charges will be limited to any increase inthe Malaysian cost of living. Malaysian inflation is expected to be 2.75% per annum, while U.S. inflationis expected to be only 1.25%.
a. How many dollars might Theresa expect to need one year hence to pay for her​ 30-day vacation?
b. By what percent will the dollar cost have gone​ up? Why?


Sagot :

Answer:

A) $10124.83

B) 1.0125%

Explanation:

1) We are told that the present charge for a luxury suite is RM 1,045/day.

This means that the charge after one year will also include inflation charge.

Thus;

Charge after 1 year = 1045 × (1 + 2.75%)

= 1045 × 1.0275 = RM 1,073.7375 per day

For 30 days, charge is;

1073.7375 × 30 = RM 32212.125

Spot exchange rate in 1 year = spot rate × (1 + RM inflation rate)/(1 + US inflation rate)

Spot exchange rate in 1 year = 3.135 × (1 + 2.75%)/(1 + 1.25%) = 3.135 × 1.0275/1.0125 = 3.1815

Cost needed one year to pay for 30 day vacation = 32212.125/3.1815 = $10124.83

B) percent by which the dollar cost will have gone​ up = (10124.83/10000) × 100% = 1.0125%

Thank you for visiting our platform. We hope you found the answers you were looking for. Come back anytime you need more information. Thanks for stopping by. We strive to provide the best answers for all your questions. See you again soon. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.