Multiple choice

Directions: Choose the correct option for the given question.

What is cross rate?

  1. A rate of exchange derived from Central Bank.

  2. A rate of exchange between two currencies, other than those that form a market's principal rates.

  3. A rate of exchange derived from the quotations for buying currencies.

  4. A rate of exchange quoted by a dealer in foreign exchange for selling currencies.
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B Correct answer
Explanation

A cross rate is the exchange rate between two currencies, neither of which is the US dollar or another major currency that serves as the market's principal benchmark rate. For example, if you want to exchange Euros for Japanese Yen, you would calculate the cross rate using both currencies' rates against the US dollar. Cross rates are essential in forex markets for currency pairs that aren't actively traded.

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