Question

Do the following problems. You must show your work.

a) You observe the following exchange rates in the market.

i) $1 = 0.85 euros and 1 krona = $ 0.13. Find the cross exchange rate between euro and krona, that is, how many euros do you receive for every krona exchanged?

ii) 1 British pound (BP) = $1.12 and 1 euro = $1.04. Find the cross exchange rate between BP and euro, that is, how many euros do you receive for every BP exchanged?

Answer 1

Cross - Exchange Rates

(i).

For every $1 we get 0.85 Euros

For every $0.13 we get 1 Krona

For every $1, we will get

Therefore,

For every 7.692 Kronas, we get 0.85 Euros

Therefore for every Krona, we get

(ii)

For every $1.12, you get 1 BP

For every $ 1 you get 1/1.12 BP

For every $1.04, you get 1 Euro

For Every $1 you get 1/1.04 Euros

Therefore for every 1/1.12 BP you get 1/1.04 Euros

Therefore for every 1 BP, you get