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5. Cross rates Please refer to Table 2 in the datafile. Does the quoted rate differ from the cross rate for any of the follow

F KU 60 00 in 0 fx E G HI C D B A Forward (3 months) Spot mid bid ask mid 1,1052 1,0543 EUR/USD 1,0532 1,0554 1,0822 GBP/USD

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Answer #1

Answer:

As given in table 2, mid rates of GBP/USD is 1.1666, EUR/USD is 1.0543 and USD/JPY is 102.55

GBP/JPY, EUR/JPY and GBP/EUR cross rates can be defined from individual quotes of GBP/USD, EUR/USD and USD/JPY rates as below:

GBP/JPY = GBP/USD * USD/JPY = 1.1666*102.55 = 119.63

EUR/JPY = EUR/USD * USD/JPY = 1.0543*102.55 = 108.11

GBP/EUR = (GBP/USD) / (EUR/USD) = 1.1666/1.0543 = 1.1065

Hence, the quoted rate 107.85 of EUR/JPY in table 2 differs from the cross rate calculated as 108.11.

The answer is C) EUR/JPY.

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