Question 16.2: Calculating the Canadian Dollar/Swiss Franc Exchange Rate Ca...
Calculating the Canadian Dollar/Swiss Franc Exchange Rate
Calculate the Canadian dollar/Swiss franc and Swiss Franc/Canadian dollar exchange rates using the cross rates of 1.4013 Canadian dollars/euro and 0.9549 euro/ Swiss Franc.
STEP 1: Formulate a Solution Strategy
Columns 2 and 4 of Table 16-3 provide the Canadian dollar/euro and euro/Swiss Franc rates, which can be used to determine the Canadian dollar/Swiss franc and Swiss franc/Canadian dollar exchange rates as follows:
\frac {Canadian \$}{€} \times \frac{€}{ Swiss franc} \frac { Candian \$}{ Swiss franc}
Since the Swiss franc/Canadian dollar exchange rate is the reciprocal of the Canadian dollar/Swiss franc exchange rate shown above, it can then be calculated as the reciprocal of the direct quote.
| TABLE 16-3 Key Currency Cross Rates, Thursday, May 8, 2018 | |||||||
| Dollar | Euro | Pound | Sfranc | Peso | Yen | CdnDlr | |
| Canada | 1.2952 | 1.5365 | 1.7544 | 1.2927 | 0.0662 | 0.0119 | … |
| Japan | 109.124 | 129.4593 | 147.8194 | 108.9171 | 5.5753 | … | 84.2559 |
| Mexico | 19.5729 | 23.2203 | 26.5135 | 19.5358 | … | 0.1794 | 15.1125 |
| Switzerland | 1.0019 | 1.1886 | 1.3572 | … | 0.0512 | 0.0092 | 0.7736 |
| UK | 0.7382 | 0.8758 | … | 0.7368 | 0.0377 | 0.0068 | 0.5700 |
| Europe | 0.8429 | … | 1.1418 | 0.8413 | 0.0431 | 0.0077 | 0.6508 |
| United States | … | 1.1864 | 1.3546 | 0.9981 | 0.0511 | 0.0092 | 0.7721 |
STEP 2: Crunch the Numbers
Substituting into the equation, we compute the euro/pound exchange rate:
\frac {Canadian \$}{€} \times \frac{€}{ Swiss franc} = 1.4013 × 0.9549 = \frac { 1.3381 Canadian \$}{ Swiss franc}
Thus, the Swiss Franc/Canadian dollar exchange rate is:
\frac{1}{ 1.3381} = \frac{0.7473 Swiss francs}{Canadian \$}
STEP 3: Analyze Your Results
The Canadian dollar/Swiss franc exchange rate is 1.3381 Canadian dollars per Swiss franc, and the Swiss franc/Canadian dollar exchange rate is 0.7473 Swiss francs per Canadian dollar