In: Finance
Isaac Díez. Isaac Díez Peris lives in Rio de Janeiro. While attending school in Spain he meets Juan Carlos Cordero from Guatemala. Over the summer holiday Isaac decides to visit Juan Carlos in Guatemala City for a couple of weeks. Isaac's parents give him some spending money, R$4,700. Isaac wants to exchange it for Guatemalan quetzals (GTQ). He collects the following rates:
Spot rate on the GTQ/€ exchange rate is GTQ 10.5268=€1.00
Spot rate on the €/R$ exchange rate is euro 0.3547 =R$1.00
a. What is the Brazilian real/Guatemalan quetzal cross rate?
b. How many quetzals will Isaac get for his reais?
Solution a:
As per the information given in the question we have
Spot rate on the GTQ/€ = GTQ 10.5268
Thus we have € / GTQ = 1 / ( GTQ/€)
€ / GTQ = 1 / 10.5268
€ / GTQ = 0.094996 €
Spot rate on the €/R$ = € 0.3547
Thus we have R$ / € = 1 / (€/R$)
R$ / € = 1 / 0.3547
R$ / € = 2.819284 R$
To find Brazilian real /Guatemalan quetzal crossrate i.e., R $ / GTQ
i.e., (R$ / GTQ) = ( R$ / € ) * ( €/ GTQ )
Applying the information available we have
(R$ / GTQ) = 0.094996 * 2.819284 = 0.267820 R$
Thus we have Brazilian real /Guatemalan quetzal crossrate i.e., R$ / GTQ = 0.267820 R$
Solution b:
Isaac has 4,700 Brazilian Real with him i.e., R$ 4,700
To find the Number of quetzals Isaac will get for his reals
We know that 1 GTQ = 0.267820 R$ i.e., R$/ GTQ = 0.267820 R$
Thus GTQ / R$ = 1 / (R$/ GTQ) = 1 / 0.267820 R$ = 3.733856 GTQ
Thus we have 1 R$ = 3.733856 GTQ
Therefore the Number of quetzals Isaac will get for his reals
= R$ 4,700 * 3.733856 GTQ = GTQ 17,549.12
The Number of quetzals Isaac will get for his Brazilian reals = GTQ 17,549.12