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Suppose that your firm is attempting to determine the euro/pound exchange rate and you have the...

Suppose that your firm is attempting to determine the euro/pound exchange rate and you have the following exchange rate information: GBP/USD = 1.5509 and the EUR/USD rate = 1.2194. Therefore, GBP1 = EUR ….. (round the number to 4 decimals)

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Answer #1

The exchange rate euro/pound can be calculated as:

reciprocal of the exchange rate of GBP/USD: 1.5509

USD/GBP = 0.6448

EUR/USD = 1.2194

By multiplying both these exchange rates we get our desired exchange rate,

Therefore, the exchange rate for EUR/GBP is = 0.7863 (0.6448*1.2194 =0.7863 rounded off to 4 decimal places).

I GBP = 0.7863 EUR

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