Question

A currency trader observes that in the spot exchange market, one U.S. dollar can be exchanged for 10.875 Mexican pesos or for 6.205 Danish krone. What is the cross-exchange rate between the peso and the krone; that is, how many pesos would you receive for every krone exchanged?

a. 1.619 pesos/krone

b. 1.658 pesos/krone

c. 1.704 pesos/krone

d. 1.753 pesos/krone

e. 1.790 pesos/krone

Answer 1

d. 1.753 pesos/krone

Step-by-step explanation:

The computation of the received pesos for exchange is shown below

Received pesos = Exchange value of one U.S dollar for Mexican pesos ÷ Exchange value of one U.S dollar for Mexican pesos

= 10.875 ÷ 6.205

= 1.753 pesos/krone

It shows a relationship between the Exchange value of one U.S dollar for Mexican pesos and the Exchange value of one U.S dollar for Mexican pesos so that per pesos/krone can come