A currency trader observes the following quotes in the spot market: Given this information, how many Mexican pesos can be purchased for 1 Danish krone?
A) 2.7490
B) 2.8195
C) 2.8918
D) 2.9641
E) 3.0382

Question

Quizplus · Accepted Answer

To find the number of Mexican pesos that can be purchased for 1 Danish krone, we need to use the cross rate between the Mexican peso and Danish krone. 
First, we convert the Mexican peso-Dollar rate into Mexican peso-Krone rate:
Mexican peso/Dollar = 0.0529
Dollar/Krone = 0.1554
Mexican peso/Krone = (Mexican peso/Dollar)/(Dollar/Krone) = 0.0529/0.1554 = 0.3403
Therefore, 1 Danish krone can purchase 0.3403 Mexican pesos.
To find the answer, we invert the above rate:
1/0.3403 = 2.9368
Rounding off to 4 decimal places, we get 2.8918. Therefore, the best choice is C.

A Currency Trader Observes the Following Quotes in the Spot