Exchange rate (example on slides)

1.       What is the Exchange rate? è 18.90/0.92 = 20,54348

2.       What will bet he Exchante rate after one year if the concept of PPP is adopted?

è (18.90*(1+0,012))/(0.92*(1+0,045)) = 20,54348 (the price in Czech Republik after one year/ the
price in USA after one year)

Cross rate quotation

USD/JPY = 104.78

USD/CHF = 1.0505

CHF/JPY = ?

Solution: (USD/JPY)/( USD/CHF) = CHF/JPY è 104.78/1.0505 = 99,74298