Given the following midpoint spot exchange rates: USD/EUR 0.9119, CHF/USD 1.5971, and USD/JPY 128.17, calculate all...

Given the following midpoint spot exchange rates: USD/EUR 0.9119, CHF/USD 1.5971, and USD/JPY 128.17, calculate all of the cross-exchange rates.

Solutions

Expert Solution

Given:

There are 4 currencies, hence using permutations and combinations, there will be following combinations

USD/x	Formula	Value
EUR	Given	0.9119
JPY	Given	128.17
CHF	1/(CHF/USD)	0.626

Let me explain this. Take the third row: USD/CHF:?

We are given the value of CHF/USD. Hence, we can find the value of USD/CHF, by taking the reciprocal of CHF/USD.

Proceeding to next table:

CHF/x	Formula	Value
USD	Given	1.5971
JPY	(CHF/USD)*(USD/JPY)	204.7003
EUR	(CHF/USD)*(USD/EUR)	1.456395

Consider second row. We need to find: CHF/JPY

Now, consider this formula: (CHF/x)*(x/JPY): We need to take the value of x such that we already possess the values of the terms: (CHF/x) and (x/JPY)

Hence, x can be USD. Putting (CHF/USD) = 1.5971 and (USD/JPY) = 128.17, we get CHF/JPY = 204.70

EUR/x	Formula	Value
USD	1/(USD/EUR)	1.0966
JPY	(EUR/USD)*(USD/JPY)	140.5512
CHF	(EUR/USD)*(USD/CHF)	0.686472

JPY/x	Formula	Value
USD	1/(USD/JPY)	0.007802
EUR	(JPY/USD)*(USD/EUR)	0.007115
CHF	(JPY/USD)*(USD/CHF)	0.004884

Rahul Sunny answered 9 months ago

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