Theresa Nunn Is Planning A 30-Day Vacation On Pulau Penang, Malaysia, One Year From Now. The Present Charge For A…

Theresa Nunn is planning a 30-day vacation on Pulau Penang, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,045/day. The Malaysian ringgit presently trades at RM3.1350/$. She figures out the dollar cost today for a 30-day stay would be $10,000. The hotel informed her that any increase in its room charges will be limited to any increase in the Malaysian cost of living. Malaysian inflation is expected to be 2.75% per annum, while U.S. inflation is expected to be only 1.25%.

 

a.               How many dollars might Theresa expect to need one year hence to pay for her 30-day vacation? Note: Remember, not for one day, but 30 days.

b.               By what percent will the dollar cost have gone up? Why?

 
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