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You just came back from Canada, where the Canadian dollar was worth $.70. You still have C$500 from your trip and could exchange them for

You just came back from Canada, where the Canadian dollar was worth $.70. You still have C$500 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for $.90. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for $.20 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$500 for 900 pesos. Should you accept the offer or cash the Canadian dollars in at the airport?

  1. What is the cross rate of the Peso per Canadian dollar at the airport foreign exchange desk?
  2. What is the cross rate of the Peso per Canadian dollar offered by the tourist?
  3. Should you accept the offer from the tourist or at the airport?

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