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Current Spot Price 1USD=0.82EUR. The exchange rate for GBP to USD is more favourable at the current spot price, compared to the average in Year 3. False Cannot say True

Question

Current Spot Price
1USD=0.82EUR.
The exchange rate for GBP to USD is more favourable at the current spot price, compared to the average in Year 3.
False
Cannot say
True

Current Spot Price 1USD=0.82EUR. The exchange rate for GBP to USD is more favourable at the current spot price, compared to the average in Year 3. False Cannot say True

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JasperElite · Tutor for 8 years

Answer

True

Explain

## Step 1:<br />To determine if the exchange rate for GBP to USD is more favorable at the current spot price compared to the average in Year 3, we first need to calculate the exchange rate for GBP to USD using the current spot prices.<br /><br />## Step 2:<br />The current spot price gives us:<br />\[1 \text{ USD} = 0.82 \text{ EUR}\]<br />\[1 \text{ EUR} = 0.95 \text{ GBP}\]<br /><br />## Step 3:<br />To find the current spot price of GBP in terms of USD, we need to combine these exchange rates:<br />\[1 \text{ USD} = 0.82 \text{ EUR}\]<br />\[0.82 \text{ EUR} \times 0.95 \text{ GBP/EUR} = 0.779 \text{ GBP}\]<br /><br />Thus, the current spot price is:<br />\[1 \text{ USD} = 0.779 \text{ GBP}\]<br /><br />## Step 4:<br />Next, we compare this with the average exchange rate in Year 3. The table shows:<br />\[\text{Year 3 FX Rate for GBP to USD} = 0.88 \text{ GBP/USD}\]<br /><br />## Step 5:<br />We now compare the two rates:<br />- Current spot price: \(1 \text{ USD} = 0.779 \text{ GBP}\)<br />- Year 3 average: \(1 \text{ USD} = 0.88 \text{ GBP}\)<br /><br />Since \(0.779 \text{ GBP} < 0.88 \text{ GBP}\), the current spot price is more favorable for converting USD to GBP.
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