Trade-Weighted Exchange Rate Calculation Steps:

• Identify trade weights: 50% (0.5) for X, 30% (0.3) for Y, 20% (0.2) for Z.
• Adjust bilateral rates from initial 100: +10% (110) for X, -10% (90) for Y, unchanged (100) for Z.
• Compute weighted average: (0.5 × 110) + (0.3 × 90) + (0.2 × 100) = 55 + 27 + 20 = 102.
• New trade-weighted rate is 102.

Why B is correct:

• Matches the formula for trade-weighted exchange rate index: initial rate × weighted sum of bilateral percentage changes.

Why the others are wrong:

• A: Ignores net appreciation from weights (50% gain outweighs 30% loss).
• C: Overstates by averaging changes arithmetically without proper weighting.
• D: Doubles the initial rate, unrelated to percentage adjustments.

Final answer: B