An Australian Solar Panel manufacturer exports panels to India at a price of 5,000 Indian Rupee...

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An Australian Solar Panel manufacturer exports panels to Indiaat a price of 5,000 Indian Rupee (INR). Currently the exchange rateis AUD/INR50.11. The forecast rate of inflation in Australia is2.8% per year and 3.9% per year in India. Use this data to answerthe following questions on exchange rate pass-through. 1. What wasthe export price for the solar panel at the beginning of the yearexpressed in Australian dollars? 2. Assuming purchasing powerparity holds, what should the exchange rate be at the end of theyear? 3. Assuming 100% pass-through of exchange rate, what will bethe dollar price of a solar panel at the end of the year? 4.Assuming 75% pass-through, what will be the dollar price of a solarpanel at the end of the year?

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Initial spot exchange rate INRAUD s 5011 Initial price of solar panel p in INR 5000 AUD inflation rate Ia 280 INR inflation rate In 390 Rate of pass through Rp 7500 Part 1 Export price at the beginning of the year AUD See Answer

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An Australian Solar Panel manufacturer exports panels to Indiaat a price of 5,000 Indian Rupee (INR). Currently the exchange rateis AUD/INR50.11. The forecast rate of inflation in Australia is2.8% per year and 3.9% per year in India. Use this data to answerthe following questions on exchange rate pass-through. 1. What wasthe export price for the solar panel at the beginning of the yearexpressed in Australian dollars? 2. Assuming purchasing powerparity holds, what should the exchange rate be at the end of theyear? 3. Assuming 100% pass-through of exchange rate, what will bethe dollar price of a solar panel at the end of the year? 4.Assuming 75% pass-through, what will be the dollar price of a solarpanel at the end of the year?