Here\'s an opportunity to put what you\'ve been learning regarding foreign excha

Question

Here's an opportunity to put what you've been learning regarding foreign exchange to work: Mark was the international marketing manager for a large US. coat company. In looking for the best place to manufacture the product he found that it would cost 10 UAE Dirhams to have the coats manufactured in Dubai while he could get them manufactured in Spain for only 4 EUROS. Since the company needed 100,000 coats Mark decided it would cost less to have them done in Spain. Did he make the right decision why or why not?

Explanation / Answer

the approximate rate of exchange of UAE DIRHAM in EURO

1 UAE Dirhams=.24 EURO

so 10 dirhams =2.4EURO

He didnt make a right decision while comparing cost purchasing power parity should be considered which is reflected in exchange rate

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