Question

The British pound is quoted at $1.38. You want to know how many pounds one dollar will purchase. To determine, calculate the ____ quotation of ____£ /$

indirect; 142.86
direct; 142.86
direct; 0.72
none of the options listed
indirect; 0.72

Answer 1

The British pound is quoted at $1.38. You want to know how many pounds one dollar will purchase. To determine, calculate the indirect quotation of 0.72 £ /$

• The given quote £1 = $1.38 is a direct quote. (assuming US is the home country)..Direct quote means one unit of foreign currency expressed in units of Home currency. It is a price given for foreign currency. In the given case, $1.38 could be obtained with £1.
• To know how many pounds one dollar will purchase, find the indirect quote.
• Indirect quote: 1 unit of home currency in no. of units of foreign currency.
• 1/Direct Quote= Indirect Quote
• 1/Indirect Quote= Direct Quote
• Therefore, indirect quote = 1/$1.38 = £0.72
• This means $1 can be purchased with £0.72