If the United Kingdom buys gold for $60 an ounce and Nigeria buys the same ounce for ₦500, what will be United Kingdom's exchange rate with Nigeria?

Answer Details

To calculate the exchange rate, we need to convert the cost of an ounce of gold in both currencies to a common currency. Let's choose the US dollar as our common currency. From the information given in the question, we know that: 1 ounce of gold = $60 (in the UK) 1 ounce of gold = ₦500 (in Nigeria) We need to convert the Nigerian Naira to US dollars to make a comparison. Let's assume that the exchange rate is X Naira per dollar. Therefore: 1 ounce of gold = $60 (in the UK) 1 ounce of gold = (₦500/X) dollars (in Nigeria) To find the exchange rate, we can equate the two expressions for the cost of 1 ounce of gold: $60 = ₦500/X Multiplying both sides by X, we get: $60 X = ₦500 Dividing both sides by ₦500, we get: X = $60 / ₦500 X = $0.12 per Naira Therefore, the exchange rate of the UK with Nigeria is $0.12 = ₦1.00