On January 1975, the Mexican peso/ US$ exchange rate was Ps12.5=$1. By January 1985, the exchange rate stood at Ps208.9=$1. By how much has the Mexican peso appreciated or depreciated against the dollar over this ten-year period?

Group of answer choices

 

 

peso devaluation of 1,571%

 

peso revaluation of 94.02%

 

peso devaluation of 94.02%

 

peso revaluation of 1,571%

The correct answer is "Peso devaluation of 94.02%".

The Mexican Peso devalued by 94.02% over the ten year period against the USD.

Step-by-step explanation

In this question, the USD is the base currency and the Mexican Peso is the quote currency as the question tells us how many Mexican Pesos can be exchanged for 1 USD. To calculate the percentage revaluation or devaluation of the Quote currency against the base currency, we use the following formula,

% Change = [(V1−V2) / |V2|] * 100

Where,

• V1 is the rate of the Quote currency against 1 unit of base currency at start.
• V2 is the rate of Quote currency against 1 unit of base currency at end.
• A negative answer means depreciation of Quote currency against Base Currency.
• A positive answer means revaluation or appreciation of Quote currency against Base currency.

In the given question, V1 is Ps12.5 and V2 is Ps208.9. Plugging these values in the formula above, we can calculate the % change to be,

% Change = [(12.5 - 208.9) / |208.9|] * 100

% Change = -94.01627% rounded off to -94.02%

This means that the Mexican peso has depreciated/devalued by 94.02% against the US