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Use the following information to answer this question. The Indian rupee (INR) to USD exchange rate at Bank A is quoted as 75INR=1 USD. The Australian dollar (AUD) to USD exchange rate at Bank B is quoted as 1.24 AUD =1 USD. You learn that Bank C is making a direct market between the Australian dollar and Indian rupee with a current INR/AUD quote of 59INR=1AUD. The INR/CAD cross rate computed from this information is: INR=1A∪D In your computations, use all of the decimal places provided. Round your answer to two decimal places.

User Soorena
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Final answer:

The INR/AUD exchange rate, calculated using the given USD exchange rates for INR and AUD, is 60.48 INR for 1 AUD. This indicates a potential arbitrage opportunity when compared with Bank C's quote.

Step-by-step explanation:

The student question pertains to the computation of a cross exchange rate, specifically the Indian rupee (INR) to the Australian dollar (AUD) rate, given the exchange rates of INR and AUD to the USD (United States Dollar). To compute the INR/AUD rate using the given market rates, we can apply a simple cross-multiplication method.

First, let's recall the given exchange rates:

  • Bank A: 75 INR = 1 USD
  • Bank B: 1.24 AUD = 1 USD
  • Bank C: 59 INR = 1 AUD (the direct market rate to verify)

To find the INR/CAD cross rate, we need to establish a relationship between INR and AUD through USD. Using Bank A and Bank B's rates, we can calculate:

1 AUD = (USD/AUD) x (INR/USD) = (1/1.24) x (75/1) = 60.48 INR

Comparing this with Bank C's quote of 59 INR for 1 AUD, we notice there is an opportunity for arbitrage. However, since the question asks for the calculated rate, our final answer is:

1 AUD = 60.48 INR

It is important to use all the decimal places for precision when calculating exchange rates and to round the final answer to two decimal places, as specified in the question. Understanding currency conversion and exchange rates is not only essential for academic purposes but also for real-world financial literacy, especially in situations involving foreign transactions.

User Virullius
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