Question

# Assume the following exchange rates: Quoted Price Value of Canadian dollar in U.S. dollars \$.94 Value...

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

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)

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