Question 16.1: Computing an Exchange Amount Using a Direct Quote An America...
Computing an Exchange Amount Using a Direct Quote
An American business must pay 1,000 euros to a German firm and the current exchange rate is $1.1293 dollars per euro, how many dollars will be required for this transaction?
STEP 1: Formulate a Solution Strategy
The dollar amount required for this transaction can be computed using the following equation:
Amount in dollars = \frac {dollar amount}{ foreign currency} \times €1,000
Note that after finding the direct quote you must then multiply the amount by the amount of foreign currency required for the transaction in order to obtain the required dollar amount.
STEP 2: Crunch the Numbers
Substituting into the equation, we compute the dollar amount required as follows:
Amount in dollars = \frac {\$ 1.1293}{ €} \times €1,000 = $1,129.30
STEP 3: Analyze Your Results
For the American business to pay the German firm €1,000, it will require $1,129.30 to complete the transaction.