Chapter 19, Problem 8P

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 RATES Suppose the exchange rate between the U.S. dollar and the Swedish krona was 7.97 krona = $1, and the exchange rate between the dollar and the British pound was £1 =$1.29. What would be the exchange rate between Swedish kronas and pounds?

Summary Introduction

To determine: The exchange rate between kronas and pounds pound.

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 1Country U dollar in terms of Country S krona is 7.97 krona.

The exchange rate of 1 pound in terms of Country U dollar is $1.29. The formula to calculate the exchange rate between kronas and pounds: Cross rate =kronasDollar×DollarPoundKrona/Pound exchange rate=Krona/$Pound/\$

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