As defined in footnote 3, cross exchange rates are exchange rates quoted against currencies other than the U.S. dollar. If you return to Table 14-1, you will notice that it lists not only exchange rates against the dollar, but also cross rates against the euro and the pound sterling. The fact that we can derive the Swiss franc/Israeli shekel exchange rate, say, from the dollar/franc rate and the dollar/shekel rate follows from ruling out a potentially profitable arbitrage strategy known as triangular arbitrage. As an example, suppose the Swiss franc price of a shekel were below the Swiss franc price of a dollar times the dollar price of a shekel. Explain why, rather than buying shekels with dollars, it would be cheaper to buy Swiss francs with dollars and use the francs to buy the shekels. Thus, the hypothesized situation offers a risk less profit opportunity and therefore is not consistent with profit maximization.

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TABLE 14-1 Exchange Rate Quotations CURRENCIES EURO Closing Mid 16.9567 DOLLAR Closing Mid 13373.5000 3.8222 115.2950 115.2949 115 2945 115.2927 103.9000 0.3054 4.4490 POUND Closing Day's Mid Change DOLLAR Closing Mid POUND Closing Day's EURO Closing Day's Change Day's Change 0.0015 0.0031 Day's Change Day's Change Jan 19 Argentina Australia Bahrain Bolivia Brazil Canada Chile China Colombia Costa Rica Czech Republic Donmark Egypt Hong Kong Hungary India Rates are derived from WM Reuters Spet Rates and MorningStar (latest rates at time of production). Some values are rounded. Currency redenominated by 1000. The exchange rates printed in this tatle are also available at www.FT.com/marketsdata Change Jan 19 Currency Argentine Peso Australian Dollar Bahrainin Dinar Bolivian Boliniano Brazilian Real Canadian Dollar Chilean Peso Chinese Yuan Colombian Peso Costa Rican Colon Czech Koruna Danish Krone Currency Indonesian Rupiah Israeli Shekel Japanese Yen Mid Mid 19.6613 1.6303 159795 -0.1293 0.0076 0.0603 Indonesia 0 0014 Israel 0.0014 Japan 0.0269 One Month 0.0241 Three Month 0.0235 One Year 0.0597 Kenya 0.0256 Kuwait 31.0000 14191.3620 -76.4156 16454.8381 4.0559 122.3458 1223458 122.3458 122.3459 110.2539 -13.7391 1.3250 03771 69300 3.2087 1.3327 661.4250 6.8766 2942.8500 5530400 1.4061 0.4001 7.3538 3.4049 1.4142 701.8740 7.2971 00157 2 0200 20198 20191 20155 00145 12155 141.8596 12156 141.8596 1.2156 4.7029 0.0045 2.0450 0.0000 0.4639 85267 3.9480 1.6398 32428 813.8212 84610 -16.0953 3620.9004 0.9380 680 4637 31.3303 8.6218 23.2651 95441 09071 357.9963 83.8675 -0.0030 0.0568 0.0363 0.0139 20449 20445 20437 -0.4039 -0.0009 141.8594 141.8596 0.0094 0.0233 2.0350 0.0424 7.4950 3.3600 12156 0.8512 127.8392 -0.0023 Kenyan Shilling Kuwaiti Dinar Malaysian Ringgit Mexican Peson New Zeuland Dular Nigerian Naira Norwegian Krone Pakistani Rupee Pervian Nuvo Sal Philippine Peso 0.0110 0.0002 0.3240 4.7211 0.3757 2.1895 Malaysia 1.9971 Mexico 0.1426 New Zealand 0.0387 Nigeria 0.0303 Norway 0 0291 Pakistan 2 6673 Peru 0.1342 Philippines 3122.8189 586.8608 27.0206 7.4358 20.0648 8.2313 308.7513 72.3309 0.0045 0.1729 0 0049 -10.0000 0.0389 0.0316 5.4741 -0.0117 0.1280 0.0007 -13.5278 0.0151 -0.4075 23.2976 1.4795 27.0136 21.9550 1.3942 304.7500 8.4894 104.8050 3.3408 49.9875 0.0050 0.0061 323.3868 -13.1902 374.9662 0.0279 08587 128.9527 0 0340 53.0445 -02064 61.5049 0.1957 0.0534 0.0350 25.4634 7.0073 189085 7.7569 290 9580 68.1625 0.0007 0.0003 0.1175 0.0626 1.7154 Egyptian Pound Hong Kong Dollar Hungarian Forint Indian Rupee 9.0086 111.2143 3.5451 10.4454 0.0008 3.0774 4.1105 -0.0206 00402 -0 0062 -0.4451 0.1060 0.1900 POUND Closing EURO EURO DOLLAR DOLLAR POUND Closing Mid Day's Change Closing Day's Day's Change Jan 19 0.0306 Three Month Closing Mid Closing Mid Closing Mid Day's Change Dey's Change 0.0026 0.0026 Day's Change Jan 19 Poland Romania Russia Currency Currency Polish Zloty Romanian Leu Russian Ruble Saudi Riyal Singapore Dollar South African Rand South Korean Won Swedish Krona Swiss Franc New Taiwan Dolar Thai Baht Tunisian Dinar Turkish Lira UAE Dirham Pound Sterling Mid Change Mid 4.1188 4.2381 59.8644 3.7505 1.4296 13.6088 0.0378 0.0334 0.5419 0.0001 0.0082 0.1300 10.8500 0.0963 0.0091 00465 0.0680 0.0244 0.0630 0.0001 0.0026 0.0026 4.3707 4.4973 63.5254 3.9798 15170 14 4410 0.0067 0.0010 0.0890 -0.0308 5.0678 5.2146 73.6575 4.6146 1.7590 16.7443 08130 0.8623 0.8616 0.0039 0.0039 0.0248 One Yoar 0.4361 United States -0.0147 One Month 0.0046 Three Month 0 1075 One Year 88139 Venezuela 0.0839 Vietnam 0.0072 European Union 0.0654 One Month 0.0536 Three Month 0.0212 One Yoar 0.0628 -0.0142 08141 United States Dollar 0.0082 0.1731 0.1731 0.1732 0.0035 0.003S 0.0039 1.0612 1.0610 1.0607 1.0589 1.2304 1.2305 1.2307 1.2318 Saudi Arabia Singapore South Africa South Korea Sweden Switzerland Taiwan Thailand 0.0025 00275 1.9545 1448.9259 0.0292 0.003E 0.0327 -97.6229 0.0052 0.0053 0.0052 0.0053 0.0050 0S666 9 950 22565 0000 1177.6000 9.0063 1.0107 31.5900 1249.6154 9.5571 1.0725 33.5219 Verenelan Belivar Fuene Vietnamese Dong Euro 10.6062 8.0000 23944 9840 -193.3965 27764.1271 0.0765 122979 11.0814 1.2435 09424 09422 09419 09401 0.0014 0.0072 0.0072 0.0072 0.0072 1.1595 1.1594 1.1593 1.1587 0 2091 38.8685 35.3785 2.3061 3.8317 3.6731 0.8127 0.8128 37.5420 2,4471 4.0660 3.8977 0.8624 08624 02171 43.5299 2.8374 Tunisia Turkey United Arab Emirates United Kingdom One Month 0.0072 0.0359 4.7145 4.5194 0.0300 0.0039 -0039