Question

In: Economics

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 1 year ago
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