An exchange rate is the price of one country\'s currency expressed in another co

Question

An exchange rate is the price of one country's currency expressed in another country's currency. Suppose an American investor is given the current exchange rates in the following table. The listed quotations are direct quotations stated in American terms. British pound (E) Euro () Australian dollar (AUS) $0.8220 Australian dollar Exchange Rate 1.8250 pound $1.4770/ euro Given these rates, an Australian dollar can purchase British pounds. Green Sun Company is a U.S.-based firm that produces stereos in Germany at a cost of 124 (including production and transportation costs) and sells them in England for E 86. Based on the exchange rate table given in the preceding question, what is Green Sun Company's dollar profit for each unit sold? O-$30.13 O -$22.27 O -$26.20 O-$27.51

Explanation / Answer

Given these rates, an australian dollar can purchase 0.4504 british pounds.

working:

required quotation = british pounds / australian dollars.

=>(USD / australian dollar) * (1 / USD / British pound)

=>$0.8220 * ( 1 / 1.8250)

=>0.4504 british pounds per australian dollar.

2nd question:

C.-$26.20.

sale price in dollars (86 pounds * 1.8250) $156.95 less: cost in dollars (124*1.4770) (183.148) profit / (loss) per unit ($26.20)

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