土豆妮

The Japanese yen is trading at USD:JPY 115.2200 and the Danish krone (DKK) is trading at DKK:JPY 16.4989. The DKK:USD exchange rate is:

A) DKK:USD 6.9835.

B) DKK:USD 0.5260.

C) DKK:USD 0.1432.

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The cross rate between USD and DKK is calculated in the following manner:

(JPY:USD)(DKK:JPY) = (1 / 115.2200) × 16.4989 = DKK:USD 0.1432 (the Yen cancels out)

土豆妮

A Mexican dealer gives a quote of USD:MXN 8.00 - 8.10 and a London dealer quotes USD:GBP 2.00 - 2.10. What is the GBP:MXN bid and ask from the perspective of a Mexican dealer?

A) 3.81 ? 3.86.

B) 4.00 ? 4.05.

C) 3.81 ? 4.05.

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This result is determined as follows:

Step 1: Invert GBP quote.

First, we need to invert the GBP quotes to make the currency units GBP:USD. Then, when we multiply by the USD:MXN quote we will have the correct GBP:MXN units. (Remember that when you take the reciprocal of a quote, the bid becomes the ask and vice versa. So, for the bid we take the given ask)

Bid: 1.00000 / 2.10000_USD:GBP = 0.47619_GBP:USD

Ask: 1.00000 / 2.00000_USD:GBP = 0.50000_GBP:USD

Step 2: Calculate GBP:MXN bid-ask Prices.

Bid: 8.00000_USD:MXN × 0.47619_GBP:USD = 3.80952_GBP:MXN, or 3.81_GBP:MXN.

Ask: 8.10000_USD:MXN × 0.50000_GBP:USD = 4.05000_GBP:MXN, or 4.05_GBP:MXN.

Thus, the GBP:MXN bid-ask is: 3.81 - 4.05.