Question

Problem 17-01
Cross Rates

At today's spot exchange rates 1 U.S. dollar can be exchanged for 9 Mexican pesos or for 111.77 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? Round your answer to two decimal places.

yen per peso?

Answer 1

Exchange rates given

Mexican Peso / US Dollar = 9

This means for 1 US Dollar we can get 9 Mexican Peso

Note - This shows that US Dollar is the strong currency and Mexican peso is the weak currency in the given quote.

Yen / US Dollar = 111.77

This means for 1 US Dollar we can get 111.77 Mexican Peso

Note - This shows that US Dollar is the strong currency and Yen is the weak currency in the given quote.

Now we need to find the cross rate to show how many yen would we receive for every peso exchanged.

or Yen / Mexican Peso

This requires cancelling the common currency from the above quotes that is US Dollars

Therefore Yen / Mexican Peso

= 111.77 / 9

= 12.42

Therefore for every Mexican peso exchanged we would receive 12.42 Yen.