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Rio Games and the Brazilian Real. Ryan Lock had planned his trip to the Olympic Games in Rio de​ Janeiro, Brazil, for many months. He had ​budgeted-saved-$16 comma 000 for expenses while in Rio. But he had postponed exchanging the dollars for Brazilian currencylong dashreal ​(BRL or ​R$)long dashuntil the very last minute on August​ 8th, doing it in the airport in the United States at BRL 3.1429equals1.00 USD. Given the following average monthly exchange rates in​ 2016, when should he have exchanged the dollars for real to maximize his Brazilian spending​ money?

Respuesta :

letmeanswer

Solution:

Assumptions                                                                  Value

US dollar funds for expenses in Rio de Janeiro       $16,000.00

Average exchange rate for the month (BRL = 1.00 USD):

January                                                                         BRL 4.0553

February                                                                        BRL 3.9651

March                                                                             BRL 3.6984

April                                                                                BRL 3.5639

May                                                                                 BRL 3.5416

June                                                                                BRL 3.4236

July                                                                                 BRL 3.2785

August 8 in Airport                                                       BRL 3.1805

Answers                                                                               Toys

Brazilian real proceeds from exchange by month:

US$ x spot exchange rate (BRL = 1.00 USD)

January                                                                           BRL 60,829.50 February                                                                         BRL 59,476.50

March                                                                              BRL 55,476.00

April                                                                                 BRL 53,458.50

May                                                                                  BRL 53,124.00

June                                                                                BRL 51,354.00

July                                                                                  BRL 49,177.50

August 8 in Airport                                                        BRL 47,707.50

Looks like Ryan messed up by waiting to exchange the currency on his flight out to Rio. The airport spot rate turned out to be the worst for Ryan as the Brazilian real had appreciated versus the US dollar over the year. The best exchange rate was that in January of 2016. But then again, Ryan did not have a crystal ball and did not know how the exchange rate would do over the year. Welcome to the dilemma of exchange rates in international travel -- and business.

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