Explanation:
Note that,
The way Foreign exchange is quoted is always interpreted as: you exchange many units of the denominator currency for 1 unit of the given numerator currency. The rates are different when you quote GBP/USD or USD/GBP.
For example, in this case, USD/GBP = 0.8.
However, the general idea here is to quote GBP/USD instead of USD/GBP.
Ultimate access to all questions.
Q.4185 Company A wants to transform $60 million floating rate debt into a fixed rate GBP loan. On trade date, Company A exchanges $60 million with Company B in return for 48 million GBP. Calculate the GBP/USD exchange rate if their agreement is set to expire in 10 years.
A
0.5
B
0.86
C
0.8
D
1.25
No comments yet.