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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

CROSS RATE A currency trader observes that in the spot exchange market, 1 U.S. dollar can be exchanged for 3 48 Israeli shekels or for 101 80 Japanese yen. What is the cross exchange rate between the yen and the shekel; that is, how many yen would you receive for every shekel exchanged?

Summary Introduction

To identify: The cross rate between Japanese Yen and Israeli shekels.

Introduction:

Foreign Exchange Rate: Foreign exchange rate refers to the rate required to obtain a currency in other country’s currency.

Cross Rates: When two currencies are quoted in relation to a common third currency then the exchange rate computed between those two currencies with the help of the third common currency is known as cross rate.

Explanation

Computation of cross rate between Japanese Yen and Israeli shekels:

Given,

Exchange rate for Israeli shekels per dollar is 3.48 shekels per dollar.

Exchange rate for Yen per dollar is 101.80 Yen per dollar.

3.48shekels=101.8yen1shekel=101.83

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