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The USD appreciates 2% versus the JPY. The USD appreciates 4% versus the MXN. What is the approximate appreciation or depreciation we might see in the JPY/MXN cross exchange rate? Fill in the blanks: The JPY/MXN cross rate should ______________ about ______________ percent

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ashishdwivedilVT

The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.

What is Depriciation?

The term depreciation refers to an accounting method used to allocate the cost of a tangible or physical asset over its useful life. Depreciation represents how much of an asset's value has been used.

The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate can be stated using the following 3 steps.

Step 1. State the initial exchange rates of the currency pairs.

Let first assume the initial exchange rates are as follows:

USD1 = JPY1

USD1 = MXN1

Therefore, we have the initial cross rate as follows:

MXN1 = USD1 = JPY1

MXN1 = JPY1

Step 2. Determine the new exchange rates

The new exchange rates can be determined as follows:

When the USD depreciates 2% versus the JPY, this implies that

USD1 X (100% + 2%) = USD1.02

has to be exchanged for JPY1.

Therefore, we now have:

USD1.02 = JPY1, or

USD1 = JPY1/1.02

USD1 = JPY0.98

Also, when The USD appreciates 1% versus the MXN, this implies that USD1  X  (100% - 1%) = USD0.99

has to be exchanged for MXN1.

Therefore, we now have:

USD0.99 = MXN1, or

USD1 = MXN1/0.99

USD1 = MXN1.01

Therefore, we have the new cross rate as follows:

MXN1.01 = USD1 = JPY0.98

MXN1.01 = JPY0.98

MXN1.01 / 1.01 = JPY0.98/1.01

MXN1 = JPY0.97, or

MXN1/0.97 = JPY0.97/0.97

MXN1.03 = JPY1

Therefore, the new exchange rates are as follows:

USD1.02 = JPY1

USD0.99 = MXN1

MXN1.03 = JPY1

c. Determination of appreciation or depreciation we might see in the MXN/JPY

Percentage of depreciation of MXN against JPY = ((Initial MXN/JPY - New MXN/JPY) / Initial MXN/YPY)  X 100 = ((1.03 - 1) / 1) * 100 = 3%

Since the percentage of depreciation of MXN against JPY is 3%, this also implies that the percentage of appreciation of JPY against MXN is 3%.

Thus, the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.

Learn more about Depreciation from:

https://brainly.com/question/18276560

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