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2. Foreign exchange rate quotations An exchange rate is the price of one countrys currency expressed in another countrys currency. Suppose an American investor is

2. Foreign exchange rate quotations

An exchange rate is the price of one countrys currency expressed in another countrys currency.

Suppose an American investor is given the current exchange rates in the following table. The listed quotations are quotations stated in American terms.

Exchange Rate

British pound () $1.8970 / pound
Euro ( ) $1.3780 / euro
Australian dollar (AU$) $0.9710 / Australian dollar

Given these rates, an Australian dollar can purchase British pounds.

Hungry Whale Electronics Company is a U.S.-based firm that produces stereos in Germany at a cost of 115 (including production and transportation costs) and sells them in England for 97. Based on the exchange rate table given in the preceding question, what is Hungry Whale Electronics Companys dollar profit for each unit sold?

$21.71

$30.65

$25.54

$24.26

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