need economics help question

Economics
Tutor: None Selected Time limit: 1 Day

1.     A Canadian wheat farmer wants to buy a tractor in the United States. The tractor costs $100,000. In the fall of 2005, the CAD/USD (Canadian dollars to U.S. dollars) exchange rate was 1.2. In the spring of 2006, the exchange rate was 1.15. In which year would the farmer pay the least amount of Canadian dollars to buy the tractor?

May 12th, 2015

1) In the fall of 2005, the CAD/USD exchange rate is 1.2.

That means 1 USD equals 1.2 CAD, that is, 1 USD = 1.2 CAD. Therefore, the cost of $100,000 can be converted to CAD by following calculation:

$100,000 = 100,000 USD x (1.2 CAD / 1 USD) = 120,000 CAD


2) Similarly, in the spring of 2006, the CAD/USD exchange rate is 1.15.

That means 1 USD equals 1.15 CAD. Therefore, the cost of $100,000 can be converted to CAD by following calculation:

$100,000 = 100,000 USD x (1.15 CAD / 1 USD) = 115,000 CAD


Therefore, it is clear that the farmer would have to pay 120,000 CAD in the fall of 2005 but only 115,000 CAD in the spring of 2006 for a tractor that costs $100,000.

In conclusion, the farmer would pay the least amount of Canadian dollars to buy the tractor in the year of 2006.

May 12th, 2015

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
...
May 12th, 2015
...
May 12th, 2015
Dec 5th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer