Caterpillar tractors are made in the US. If Tractors Ltd., a company in Britain, wants to buy a tractor, it must pay for it in US dollars ($). But Britain's currency is the pound sterling (£). How would the British company complete the sale?

Question

Business

Tripp Ayers

12 June, 01:14

Caterpillar tractors are made in the US. If Tractors Ltd., a company in Britain, wants to buy a tractor, it must pay for it in US dollars ($). But Britain's currency is the pound sterling (£). How would the British company complete the sale?

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Answers (1)

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Ignacio · Answer 1

Tractors Ltd. would pay an exchange fee to buy dollars with their pounds.

Explanation:

Foreign exchange involves the exchange of one currency for another during a transaction between two countries with different currencies.

In international trade a country like Britain for example will have to exchange it's currency (pound) for the dollar in order to complete the transaction that is in dollar.

This exchange usually attracts a conversion fee that is paid by the buyer in this transaction.