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Suppose that Cloudastries Bank is a U.S.-based financial intermediary that serves the foreign exchange market. Assume that this bank is willing to both purchase and sell currency for the same rate. In other words, assume there is no bid/ask spread. Suppose Cloudastries has made the following direct quotations:

Currency Dollar Spot Rate
Mexican Peso $0.45
Euro $1.80

Additionally, Cloudastries has quoted a cross exchange rate of 1 euro = 2.01 pesos.

Based on the spot rates in the table, the cross exchange rate of the euro should be equal to ___________

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ajeigbeibraheem

The cross exchange rate of 1 euro based on the spot rates in the table is 2.22 pesos.

What is the Bid or Ask Spread in the Foreign Exchange Market?

In Foreign Exchange, the bid or ask spread is the difference or the margin between the bid and the ask price.

From the given table, we have;

                 Currency         Dollar Spot Rate

Mexican    Peso                  $0.45

European   Euro                  $1.80

Condition: assuming there is no bid/ask spread, and based on the spot rate in the table;

  • 1 Peso = $0.45
  • 1 euro = $1.80

The cross exchange rate of the euro can be computed as:

[tex]\mathbf{= \dfrac{1}{0.45 }= \$2.22}[/tex]

Learn more about Bid or Ask spread here:
https://brainly.com/question/25516976

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