Country x conducts 60% of its trade with country y and 40% of its trade with country z. The initial value of the trade weighted exchange rate index of country x is 100. What will be its new trade weighted exchange rate index value if it's currency falls in value by 20% against the currency of y and rises by 10% against the currency of z? The answer is apparently 25 according to the answer sheet(mock exam) but I don't understand why? Can someone please help explain this to me?
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