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2. Foreign exchange rate quotations Aa Aa 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 direct quotations stated in American terms British pound (E) Euro () Australian dollar (AUS) $0.8970 Australian dollar Exchange Rate $1.9760 / pound 1.3210 euro Given these rates, an Australian dollar can purchase British pounds Purple Whale Foodstuffs Inc. is a U.S.-based firm that produces stereos in Germany at a cost of 110 (including production and transportation costs) and sells them in England for E 102. Based on the exchange rate table given in the preceding question, what is Purple Whale Foodstuffs Inc.s dollar profit for each unit sold? O $64.68 $67.49 $61.86 O $56.24

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Dollar profit for each unit Direct quotations 1 pound 1 euro 1 AUD 1.976 $ 1.321 $ 0.897 $ Sales price per unit Cost per unit 102 pound 110 euro 201.552 145.31 56.242 4 We need to compute 1 AUD pound 10 12 13 as we know 1 AUD 1 pound 0.897 $ 1.976 $ 1 AUD 0.454 pound 16 I 17 18 19 20 Australian dollar can purchase 0.454 British pounds2 Direct quotation:s 31 pound 4 1euro 5 1AUD Dollar profit for each unit 1.976 1.321 0.897 Sales price per unit Cost per unit 102 110 pound -H4 B3 7 We need to compute 9 1AUD 10 11 as we know 12 1AUD 13 1 pound pound 0.897 1.976 15 1AUD -B12 1/B13 pound 17 Australian dollar can 18

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