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In: Finance

Isaac​ Díez. Isaac​ Díez Peris lives in Rio de Janeiro. While attending school in Spain he...

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?

Solutions

Expert Solution

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 cross​rate 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 cross​rate 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

jeff jeffy answered 2 hours ago
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