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Question: 1 / 430

What is the definition of cross rate?

The exchange rate between two foreign currencies

Domestic currency per foreign currency

The exchange rate between the domestic currency and the US dollar

Domestic currency per US dollar / Foreign currency per US dollar

The definition of a cross rate pertains to the exchange rate between two foreign currencies. This means it expresses the value of one currency in terms of another currency, without involving the domestic currency or US dollar as an intermediary.

Cross rates are particularly useful in international finance for trading currencies where one may not have a direct quote against the domestic currency. The method used to calculate a cross rate, specifically the answer that combines the domestic currency per the US dollar and the foreign currency per the US dollar, illustrates how to derive the exchange rate between two foreign currencies using the US dollar as a common reference point.

This method allows for understanding the relative values of two currencies directly, which is essential for making informed decisions in international transactions and investments.

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