Question

1. USD/Brazilian Real = 3.949, USD/Australian Dollar = 1.5, USD/Chinese Yuan = 5.817

What is the Australian Dollar/Chinese Yuan cross rate? Enter your answer rounded off to THREE decimal points.

2. Suppose the exchange rate for the Swiss Franc is quoted as SF 1.10 in the spot market and SF 0.97 in the 90-day forward market. Is the dollar selling at a premium or a discount relative to the franc? PREMIUM OR DISCOUNT

3. Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.1211 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 1.0412 euros. What is the cross-rate of euros to Swiss francs (Euro/SF)? Enter your answer rounded off to FOUR decimal points.

Answer 1

1]

Australian Dollar/Chinese Yuan cross rate = (USD/Chinese Yuan) * (Australian Dollar / USD)

Australian Dollar / USD = 1 / (USD/Australian Dollar)

Australian Dollar/Chinese Yuan cross rate = 5.817 * (1 / 1.5)

Australian Dollar/Chinese Yuan cross rate = 3.878

2]

The dollar is selling at a discount because each dollar can buy less SF in the forward market as compared to the spot market.

3]

cross-rate of euros to Swiss francs = (SF per $ rate) * ($ per euro rate)

$ per euro rate = 1 / euro per $ rate

cross-rate of euros to Swiss francs = (1.1211) * (1 / 1.0412)

cross-rate of euros to Swiss francs = SF1.0767 per euro