A Nigerian exporter sells cocoa valued at 2,500,000 Naira (\text{NGN}) to an importer in t… — JAMB UTME

A Nigerian exporter sells cocoa valued at $2,500,000$ Naira ( $\text{NGN}$ ) to an importer in the United States. If the prevailing foreign exchange rate is $1\text{ USD} = 1,250\text{ NGN}$ , how much will the importer pay in US Dollars ( $\text{USD}$ )?

Answer: 2000 USD

Answer

The importer will pay 2,000 USD.

To convert an amount expressed in domestic currency (Naira) to a foreign currency (US Dollars), divide the total domestic value by the exchange rate. Dividing

2,500,000\text{ NGN}

1,250\text{ NGN per USD}

gives

2,000\text{ USD}

Step-by-Step Solution

Identify the values given in the problem statement.

Total export value =

2,500,000\text{ NGN}

; Exchange rate =

1,250\text{ NGN}

per

\text{USD}

Establishing the target foreign currency and domestic currency values is the essential first step in exchange rate conversion.

Divide the amount in domestic currency by the exchange rate per US Dollar.

\frac{2,500,000}{1,250} = 2,000\text{ USD}

Converting from domestic currency to foreign currency requires dividing the domestic currency value by the units of domestic currency per unit of foreign currency.

Key Concept

Foreign Exchange Rate Conversion

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