A currency trader observes that in the spot exchange market, one U.S. dollar can
ID: 2635083 • Letter: A
Question
A currency trader observes that in the spot exchange market, one U.S. dollar can be exchanged for 10.875 Mexican pesos or for 6.205 Danish krone. What is the cross-exchange rate between the peso and the krone; that is, how many pesos would you receive for every krone exchanged? SHOW YOUR WORK FOR POINTS
Answer
1.704 pesos/krone
1.658 pesos/krone
1.753 pesos/krone
1.619 pesos/krone
1.790 pesos/krone
a.1.704 pesos/krone
b.1.658 pesos/krone
c.1.753 pesos/krone
d.1.619 pesos/krone
e.1.790 pesos/krone
Explanation / Answer
A currency trader observes that in the spot exchange market, one U.S. dollar can be exchanged for 10.875 Mexican pesos or for 6.205 Danish krone. What is the cross-exchange rate between the peso and the krone; that is, how many pesos would you receive for every krone exchanged?
No of pesos would you receive for every krone exchanged = 10.875/6.205
No of pesos would you receive for every krone exchanged = 1.753 pesos/krone
Answer
C) 1.753 pesos/krone