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2. Foreign exchange rate quotations An exchange rate is the price of one country’s currency expressed...

2. Foreign exchange rate quotations

An exchange rate is the price of one country’s currency expressed in another country’s currency.

  

1. Suppose an American investor is given the current exchange rates in the following table. The listed quotations are _1.__(direct/ Indirect)___ quotations stated in American terms.

Exchange Rate

British pound (£) $1.8790 / pound
Euro (€ ) $1.3210 / euro
Australian dollar (AU$) $0.8970 / Australian dollar

2.Given these rates, an Australian dollar can purchase__2.(__)___ British pounds.

3. Green Caterpillar Garden Supplies Inc. is a U.S.-based firm that produces stereos in Germany at a cost of € 110 (including production and transportation costs) and sells them in England for £ 92. Based on the exchange rate table given in the preceding question, what is Green Caterpillar Garden Supplies Inc.’s dollar profit for each unit sold?

$26.18

$27.56

$33.07

$28.94

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