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Danske Bank, the largest bank in Denmark, is currently quoting spot rates between the U.S. dollar and the Danish krone, and between the US dollar

Danske Bank, the largest bank in Denmark, is currently quoting spot rates between the U.S. dollar and the Danish krone, and between the US dollar and the Australian dollar, as follows: Bid_______ Asked______ Dkr6.3050/$ Dkr6.3150/$ A$1.3755/$ A$1.3845/$

  • Assume that you are a resident of Copenhagen, Denmark, who wants to visit Australia to see kangaroos. You visit the BigBank to buy Australian dollars with Dkr5,000. Today there was no market transaction between Dkr and A$, and the market rate between the two currencies was not established yet. So, the bank will calculate cross rates between Dkr and A$, based on which it will sell A$ to you (and buy Dkr from you). If the banks cross rate calculations were correct, how much A$ would you receive from the bank in return for your Dkr5,000?

A$1,000

A$1,048

A$1,094

AS1,089

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