In the United States, we can buy road bicycle for 2,500 USD. These bikes are identical in all aspects to bicycles from Taiwan that be purchased for 75,000 TWD (Taiwanese New Dollars) including shipping costs
What percentage (relative to $2,500 U.S. cost) can we save by buying the bike in Taiwan if the exchange rate is 1 USD for 32 TWD?
A) 6.25%
B) 7.00%
C) 7.25%
D) 8.13%
Answer: A
Explanation: A) Cost of Taiwanese bike = 75,000 TWD/(32 TWD per USD) = $2,343.75. Thus, we can save $2,500 - $2,343.75 = $156.25 by buying in Taiwan. On a percentage basis, we save $156.25/$2,500 = .0625 or about 6.25%.
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