The following sales revenue pattern for a British trading concern was cited earlier in the chapter:
|
2009 |
2010 |
2011 |
|
|
Sales revenue |
£23,500 |
£28,650 |
£33,160 |
Required:
a: Perform a convenience translation into U.S. dollars for each year given the following year-end exchange rates:
|
2009 |
£1 = $2.10 |
|
2010 |
£1 = $2.20 |
|
2011 |
£1 = $1.60 |
b. Compare the year-to-year percentage changes in sales revenues in pounds and in U.S. dollars. Do the two time series move in parallel fashion? Why or why not?
c. Suggest a method for minimizing the effect of exchange rate changes on foreign currency trend data.