Question

Assume the following exchange rates: Quoted Price Value of Canadian dollar in U.S. dollars $.94 Value of New Zealand dollar in U.S. dollars $.30 Value of Canadian dollar in New Zealand dollars NZ$3.10 The actual cross rate between Canadian dollar and New Zealand dollar is _______, and the implied (calculated) cross rate between Canadian dollar and New Zealand dollar is __________. A. NZ$3.10; NZ$3.13 B. NZ$3.13; NZ$3.15 C. NZ$3.10; NZ$3.15 D. NZ$3.13; NZ$0.313

Answer 1

Select - A ......... NZ$3.10; NZ$3.13

The actual cross rate between Canadian dollar and New Zealand dollar is _NZ$ 3.10_, and the implied (calculated) cross rate between Canadian dollar and New Zealand dollar is NZ$ 3.13

Explanation

Actual cross rate is directly given in the question it self ....... NZ$ 3.10

Calculation of implied cross rate

NZ / Can $ = NZ$ / $ * $ / Can $ = 1/0.30 * 0.94 = 3.13

$ / NZ$ = 0.30 is given. But in the above formula we want NZ$ / $ ......... so we take it as 1/0.30

$ / Can $ = 0.94 ( is given)