1.) A U.S. Investor wants to invest $5,000 in China at a 6% interest rate. Today the exchange rate is 6.88 CNY/USD.
How many CNY will the investor have in one year? (36,464 CNY)
The investor exchanges CNY for USD at 6.75 CNY/USD. How many USD does the investor have? ($5,402.07). What is the investors return? (8.04%)
Which currency appreciated? (CNY - it takes fewer CNY to buy a dollar)
Which currency depreciated? (USD - a USD buys fewer CNY).
How much, in percent, did the USD depreciate? (-1.89%)
2.) The current British Pound to Euro exchange rate is £.86/€. How many Euros does it take to buy one British Pound? (£1.1628)
In one year, the exchange rate becomes £.75/€. Which currency appreciated? (£). Which currency depreciated? (€).
In percent, how much did the appreciating currency rise? (14.67%)
In percent, how much did the depreciating currency fall? (12.79%)