help for a numerical test

CFA General
#1

I need to understand this for a numerical test that I’m writing soon. Please help! Suppose 7.8HKD=1USD Please explain the difference between the following questions: If the HKD appreciated 20% against the USD, how many HKD would you need to buy a USD? ANS: =(7.8/1.2) = 6.5 and If the HKD strengthened 20% against the USD, how many HKD would you need to buy a USD? ANS: 6.24

#2

I have always heard the words “strengthened” and “appreciated” used interchangeably. Since the HKD is pegged to the dollar a 20% move in HKD would be a peg movement which would be exciting. HK banks would have to increase their dollar reserves by $150 B. Oh boy, that would be exciting!

#3

7.8 / 1.2 = 6.5 7.8 * 0.8 = 6.24

#4

Yes, I am curious to know why “appreciated” means add 20% to the denominator, whereas “strengthened” means subtract 20% from the numerator, since they obviously give different results. It would certainly strengthen my appreciation for currencies.

#5

bchadwick Wrote: ------------------------------------------------------- > Think of it as how many $1s it costs to buy 1 HKD.

#6

That doesn’t help. Does it cost 20% more dollars to buy an HKD (add 20% to the denominator) or does one dollar buy 20% fewer HKD (subtract 20% from numerator)? And which one represents “appreciating” and which one represents “strengthening”?