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1 February, 10:42

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?

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  1. 1 February, 13:42
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    Answer: i. €0.11

    ii. €1.08

    Explanation:

    i. If we get 1 krona for every $0.13 then how many krona do we get per dollar?

    = 1/0.13

    = 7.69 Krona is to $1

    If $1 is 7.69 Krona and $1 is also €0.85 then that means that,

    € 0.85 = 7.69 Krona

    So for each Krona exchanged, we get how many Euro,

    = 0.85/7.69

    = 0.11

    For each Krona exchanged, we get €0.11

    ii. Following the example of the first question,

    if £1 is to $1.12 then how many pounds are a dollar?

    = 1/1.12

    = 0.89

    £0.89 is equal to a dollar.

    if €1 is to $1.04 then how many euros are a dollar?

    = 1/1.04

    = 0.96

    €0.96 are equal to a dollar.

    This means that,

    £0.89 = €0.96

    So for every British Pound exchanged we get how many Euros?

    = 0.96/0.89

    = 1.078

    = €1.08

    For every British pound Exchanged, we get €1.08
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