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26 March, 20:43

Assume the spot rate of the British pound is $1.73. The expected spot rate 1 year from now is assumed to be $1.66. What percentage depreciation does this reflect?

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  1. 26 March, 21:08
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    The correct answer is 4.05%.

    Explanation:

    According to the scenario, the given data are as follows:

    Spot rate = $1.73

    Expected spot rate after 1 year = $1.66

    So, we can calculate the depreciation percentage by using the following formula:

    Expected Depreciation = (Expected spot rate after 1 year - Spot rate) / Spot rate

    So, by putting the value

    = ($1.66 - $1.73) / $1.73

    = - $0.07 / $1.73

    = - 4.05%

    Hence, the depreciation percentage is 4.05%.
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