Suppose that a quote for the dollar spot exchange rate of Danish kroner (symbol DKi or code DKK) is DKr8 25 per dollar, and a quote for the dollar spot exchange rate of Swiss Franc is SFrl 65 per dollar a What should be the quote for the SFnDKr cross rate so that there are no arbitrage opportunitie...

a There would be no arbitrage opportunities if cross rate SFr DKr DKr SFr Because SFr 165 S ...

Suppose that a quote for the dollar spot exchange rate of Danish kroner (symbol DKi or code

Question:

Suppose that a quote for the dollar spot of Danish kroner (symbol DKi or code DKK) is DKr8.25 per dollar, and a quote for the dollar spot of Swiss Franc is SFrl.65 per dollar.
a. What should be the quote for the SFnDKr cross rate so that there are no arbitrage opportunities (ignore transaction costs)?
b. Suppose a bank is offering a quote for the SFnDKr- cross rate as DKr5.20 per SFr. In this quote, which currency is overvalued with respect to the other?
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...