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Assume that Australia trades mostly with two countries only, the United States and the United Kingdom, and that 65% of the trade is conducted in the United States, 30% with the United Kingdom and 5% with the rest of the world. The exchange rates of the Australian Dollar at two points in time, 0 and 1, are as follows:

Exchange Rate	Period 0	Period 1
AUD/USD	1.4541	1.7800
AUD/GBP	2.1555	2.5700

I. Calculate the exchange rates in indirect quotation from an Australian perspective. [Provide your answer to 4 decimal points].

II. Calculate the percentage rates of depreciation or appreciation of the Australian Dollar against the two currencies. Comment on your results. [Provide your answer to 2 decimal points].

III. Calculate the exchange rate relatives, using period 0 as a base period, and the base value = 100 {Provide your answer to 2 decimal points.]

IV. Calculate the unweighted effective exchange rate index, using period 0 as a base period in which the index assumes the value of 100.

V. Calculate the normalized trade weights. [Provide your answer to 2 decimal points.]

VI. Calculate the trade-weighted effective exchange rate index using geometric approach, and explain the result with reference to the Australian Dollar. {Provide numerical answers to 2 decimal points]

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