Question

Caterpillar tractors are made in the US. If Tractors Ltd., a company in Britain, wants to buy a tractor, it must pay for it in US dollars ($). But Britain's currency is the pound sterling (£). How would the British company complete the sale?

Answer 1

Answer:

Tractors Ltd. would pay an exchange fee to buy dollars with their pounds.

Explanation:

Foreign exchange involves the exchange of one currency for another during a transaction between two countries with different currencies.

In international trade a country like Britain for example will have to exchange it's currency (pound) for the dollar in order to complete the transaction that is in dollar.

This exchange usually attracts a conversion fee that is paid by the buyer in this transaction.