bcp901

You have USD and want Euros, set up the equation to cancel out the Euro:
Euro * USD / Euro = USD
Since the question gave you Euro/USD and not USD/Euro. you must use the indirect quote and thus the ASK.
250,625 Euors * 1 / .84674 = $295,988
Answer is A
If the question would have given you the quote as USD/EUR you would use the bid.
Set up the equation to cancel out the currency that you do not want. If it is direct then use the bid, if it is indirect use the ask.

dandman

The answer is A
1 USD = .84674 EUR (which means I will get .84674 EUR for 1 USD) and;
.84710 EUR = 1 USD (which means it will cost me .8471 EUR to get 1 USD)
The fact that we are converting USD to EUR requires us to use .84674

stockjaguar

I got C and I’m pretty sure I’m correct b/c you have to take into account that fact that the investor’s name is Delores and that rhymes with a female body part that starts with the letter “C” Therefore the answer is C.
Case closed!

AndyNZ

This question is assuming we are starting out with $, but why couldn’t she borrow in Euros directly and convert it to $ when she has to sell?

svgleeson

Shouldnt it be they will pay you 0.84674 E for your $1 and will sell that $1 for 0.84710? If you think of it as a business and their product is $, they will sell for more than the price they paid to make the profit.

wizofoz

It’s A.
The investor here is in US. That’s why he’s considering between investing in ADR (for convenience) or making direct investment into Europe market. Hence he’s holding USD= need to sell USD to get EUR. The key is: if he was in Europe, why does he have to buy ADR in US market which is a foreign market to him?