Spot rate: Suppose a Tata Nano car is priced at Rs. 100,000 in New Delhi and $3,129 in New York. In which place is the car more expensive if the spot rate is $0.0242/Rs.?

Question

Quizplus · Accepted Answer

To compare the prices in both locations, we need to convert one price into the currency of the other location using the spot rate. 
Converting the price of the Nano car in New Delhi to dollars:
Rs. 100,000 x $0.0242/Rs. = $2,420
Comparing this to the price of the Nano car in New York ($3,129), we see that the car is more expensive in New York. Therefore, the answer is B, in New York.

Spot Rate: Suppose a Tata Nano Car Is Priced at Rs