A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar:

SFr/$ = 1.5960 − 70

A$/$ = 1.7225 − 35

An Australian firm asks the bank for an A$/SFr quote. What cross-rate would the bank quote?

To calculate the cross-rate between Australian dollars (A$) and Swiss francs (SFr), we will use the given exchange rates for Swiss francs and Australian dollars against the US dollar (USD). The general formula for cross-rates is:

\[
\text{Cross rate} \, (A\$/SFr) = \frac{\text{A\$/USD}}{\text{SFr/USD}}
\]

We are given the following exchange rates:
- Swiss francs against USD (SFr/USD) = 1.5960 − 1.5970
- Australian dollars against USD (A\$/USD) = 1.7225 − 1.7260

Now, let's compute the A$/SFr cross-rates for both the bid and ask prices:

### 1. Bid Price for A$/SFr:
- Bid price for A$/SFr = (Bid price of A\$/USD) ÷ (Ask price of SFr/USD)
- Bid = $ \frac{1.7225}{1.5970} $

### 2. Ask Price for A$/SFr:
- Ask price for A$/SFr = (Ask price of A\$/USD) ÷ (Bid price of SFr/USD)
- Ask = $ \frac{1.7260}{1.5960} $

Let me calculate these values for you.The cross-rate the bank would quote for A$/SFr is:

- Bid price: 1.0786 A$/SFr
- Ask price: 1.0815 A$/SFr

Would you like more details or have any further questions?

Here are 5 related questions you might find helpful:
1. How do cross-rates affect international trade?
2. What is the significance of the bid-ask spread in currency exchange?
3. How do exchange rates influence a company’s foreign earnings?
4. What factors determine the fluctuations in cross-currency rates?
5. How are exchange rates set by banks in different countries?

**Tip:** Understanding how bid and ask prices work in exchange rates is crucial for getting the best deal in currency conversion. Always aim to understand the spread!

Learn how to calculate the cross-rate between Australian dollars (A$) and Swiss francs (SFr) based on bid-ask spreads. Using given exchange rates against the US dollar, this example demonstrates the formulas for bid and ask prices. Ideal for advanced students in Grades 11-12 or finance enthusiasts.

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