You have an opportunity to buy 250 Canadian dollars with 100 British pounds. Which one of the following statements is correct given the following exchange rates? Assume you start out with 100
British pounds.

Question

Quizplus · Accepted Answer

To solve this problem, we need to compare the exchange rates between British pounds and Canadian dollars.

Let's look at the given exchange rates:

1 British pound = 1.66 Canadian dollars

This means that if we have 100 British pounds, we can convert them to:

100 x 1.66 = 166 Canadian dollars

Now, let's see what happens if we use our 100 British pounds to buy the offered 250 Canadian dollars:

250 Canadian dollars / 1.66 Canadian dollars per British pound = 150.6 British pounds

Since we only started with 100 British pounds, we would need to convert some of the Canadian dollars back to British pounds in order to complete the transaction.

150.6 - 100 = 50.6 British pounds

So, we would have 50.6 British pounds left after buying the 250 Canadian dollars.

Now, let's see the difference between our starting point and ending point:

Starting point: 100 British pounds

Ending point: 50.6 British pounds + 250 Canadian dollars

In order to compare these two values, we need to convert the Canadian dollars back to British pounds using the exchange rate:

1.66 Canadian dollars = 1 British pound

250 Canadian dollars = 250 / 1.66 = 150.6 British pounds

So, our ending point is:

50.6 British pounds + 150.6 British pounds = 201.2 British pounds

To find the profit, we need to subtract our starting point from our ending point:

Profit = 201.2 - 100 = 101.2

Therefore, the correct answer is D) You can earn a profit of £9.85.

You Have an Opportunity to Buy 250 Canadian Dollars with 100