Chapter 19, Problem 2P

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Chapter
Section

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

# CROSS RATE A currency trader observe that in the spot exchange market, 1 U.S. dollar can be exchanged for 3.58 Israeli shekels or for 109 Japanese yen. What is the cross-exchange rate between the yen and the shekel; that is, how main yen would you receive for every shekel exchanged?

Summary Introduction

To determine: The yen received for every shekel exchanged

Introduction:

The rate which indicates the conversion rate for currencies of two different countries that can be obtained through exchange of the currency of third country is the cross rate. Both different currencies are converted into common third currency for comparison purpose.

Explanation

Given information:

The exchange rate of 1 Country U dollar in terms of shekels is 3.58 shekels (₪).

The exchange rate of 1 Country U dollar in terms of yen is 109 yen (¥).

The formula to calculate the exchange rate of shekel in yen with reference of Country U dollar:

Yen/Shekels exchange rate=Yen/$Shekels/$

Compute the exchange rate of shekel in yen:

Yen/Shekels exchange rate=109 yen/\$13

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