A corporation dealing in foreign exchange may desire to obtain an exchange quote between the pound and franc, whose values are both expressed relative to the dollar.____ are used to determine such a relationship.
A) Spot exchange rates
B) Forward exchange rates
C) Cross exchange rates
D) Option exchange rates

Question

Quizplus · Accepted Answer

Cross exchange rates are used to determine the relationship between two currencies that are not directly quoted in the same market. In this case, the corporation would need to use a cross exchange rate to find the relationship between the pound and franc relative to the dollar. Spot exchange rates refer to the current exchange rate for immediate delivery, while forward exchange rates involve a contract for future delivery at a specified rate. Option exchange rates refer to the cost of purchasing an option contract on a currency.

A Corporation Dealing in Foreign Exchange May Desire to Obtain