Suppose the U.S. dollar-Russian ruble exchange rate is 0.015480US dollars = 1.00 Ruble, and the...

Suppose the U.S. dollar-Russian ruble exchange rate is 0.015480 US dollars = 1.00 Ruble, and the Jamaican dollar-U.S. dollar exchange rate is 119 Jamaican dollars = 1.00 US dollar. Based on these rates, how many Russian Rubles should 1 Jamaican dollar convert into?

Solutions

Expert Solution

When exchange rate is not readily available between two currencies we can use cross rates to arrive at such exchange rates

Direct quote: 1 unit of foreign currency expressed in no. of units of Home currency is called direct quote i.e. a price is given for foreign currency it is direct quote

Indirect quote: 1 unit of local currency in no. of units of foreign currency is indirect quote.

1/Direct Quote= Indirect Quote, 1/Indirect Quote= Direct Quote

Given per US dollar per Ruble = 0.015480

Rubles per US dollar = 1/ 015480

= 64.59948 Rubels per USD

Given USD per Jamaican Dollar = 119 Jamaican Dollar per USD

Jamaican Dollar per UDS = 1/119

= 0.008403 per jamaican dollar

In cross rates we use a common currency quotation

Calculation of no of Rubles per one Jamaican dollar = Russian Rubles/USDollar * US Dollar/Jamiacan dollar

= 64.59948 * 0.008403

= 0.542853

jeff jeffy answered 1 year ago

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