Question

A German firm is attempting to determine the euro/pound exchange rate and has the following exchange rate information: USD/pound = $1.5509/£ and the USD/euro rate = $1.2194/€. Therefore, the euro/pound rate must be:

Answer 1

Answer:

Exchange rate is €1.272 per £

Explanation:

Exchange rate is defined as the amount of one currency that can be changed for another currency. This is a very important consideration in international trade where strength of a countrie's currency determines how much of the other currency will be bought.

We are given that $1.5509= £1

So $1 will be (1*1)/1.5509= £0.6448

Also $1.2194= €1

So $1 is (1*1)/1.2194= €0.82

Therefore

€0.82= £0.6448

x= £1

Cross-multiply

x= 0.82/0.6448

x= €1.272 per £