A marine biologist is planning to move from Sydney, Australia to San Francisco. She has $5,000 Australian dollars (AUD) to make the move. In the summer of 2006, the exchange rate of USD/AUD is 0.765, and the USD is rising against the AUD. If the rising dollar trend continues, and all other economic elements remain equal, will her AUD be worth more USD now or later? Explain.
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Currently her $5,000 AUD is worth $3,825 USD.
5,000 AUD * (0.765 USD/AUD)
5,000 * 0.765
= $3,825
If the USD dollar rises against the AUD, the ratio will decrease. For instance right now, it takes 0.765 USD to equal 1 AUD. If the dollar increases, it will take fewer dollars to equal 1 AUD. Let's say it takes 0.5 dollars per 1 AUD. The conversion changes to:
5,000 AUD * (0.5 USD/AUD)
5,000 * 0.5
= $2,500
Thus, her AUD will be worth more now.
5,000 AUD * (0.765 USD/AUD)
5,000 * 0.765
= $3,825
If the USD dollar rises against the AUD, the ratio will decrease. For instance right now, it takes 0.765 USD to equal 1 AUD. If the dollar increases, it will take fewer dollars to equal 1 AUD. Let's say it takes 0.5 dollars per 1 AUD. The conversion changes to:
5,000 AUD * (0.5 USD/AUD)
5,000 * 0.5
= $2,500
Thus, her AUD will be worth more now.