Confusion on Currency (PEV)

Lin84

I was just practicing some questions from the book. I'm slightly confused with question 4.4 on page 133, part e. I thought that the equation was

price x (rate converting to/rate converting from) (same as indices P.36)

So in this case £5 x ($2/$2.50) = £4

But the answers in the book has done it the other way round:

£5 x ($2.50/$2) = £6.25

Could some one please explain this to me please.

Thank you

Lin

acky2106

What book are you studying from Lin?

sjf

hi

I could be wrong but I think it is because it is a currency rate difference not a time differance like the index numbers:confused1: