Problem 1: Cross Rates: A currency trader observes that in the spot exchange market, 1 U.S. dollar can be exchanged for 4.0828 Israeli shekels or for 111.23 Japanese yen. What is the cross exchange rate between the yen and shekels; that is, how many yen would you receive for every shekel exchanged?
Problem 2: Purchasing power parity: A television set costs $500 in the United States. The same set costs 725 euros. If purchasing power parity holds, what is the spot exchange rate between the dollar?
Problem 3: Purchasing Power parity: In the spot market 7.8 Mexican pesos can be exchange for 1 U.S. dollar. A compact disc costs $15 in the United States. If purchasing power parity (PPP) hold, what should be the price of the same disc in Mexico?