Question

Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 0.70 euro. What is the cross rate of Swiss francs to euros? (In other words, how many Swiss francs are needed to purchase one euro?) Do not round the intermediate calculations and round the final answer to four decimal places.

Answer 1

Answer: 2.0143

Explanation:

From the question, we are informed that the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 0.70 euro.

The cross rate of Swiss francs to euros will be the exchange rate between U.S. dollars and Swiss francs which is SF 1.41 = $1.00 multiplied by the exchange rate between the U.S. dollar and the euro which is $1.00 = 0.70 euro. This will now be:

= (1.41/1.00) × (1.00/0.70)

= 1.41 × 1.4285714286

= 2.0143

The cross rate of Swiss francs to euros is SF 2.0143 = 1 euro