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Basic Question 8 of 19
Given the spot rate quotes in the interbank market:
USD/AUD: 1.0339 - 1.0348, USD/NZD: 0.8248 - 0.8286
B. 0.8535 - 0.8567.
C. 0.7971 - 0.8014.
USD/AUD: 1.0339 - 1.0348, USD/NZD: 0.8248 - 0.8286
What is the implied bid-ask AUD/NZD cross rate?
A. 0.7978 - 0.8007.
B. 0.8535 - 0.8567.
C. 0.7971 - 0.8014.
User Contributed Comments 5
| User | Comment |
|---|---|
| Gouldenone2 | Some please explain how 1 NZD buys .8248 dollars!!! The quote shows 1 dollar buys .8248 NZD, how in the hell can we ever figure it out if the keep switching quotes. If it was NZD/USD .8248.... then 1 NZD would buy .8248 dollars...WTFFFFF |
| Gouldenone2 | Whatever is first is 1 dollar. So USD(1)/(buys) (.8248)NZD whether indirect or direct the first one is always worth one!!!!!!! Schweser does the same thing and I dont get it. So if you sell one NZD bid ask aside, you will roughly get 1.21 dollars!! Some please tell me how this problem makes any sense |
| bablig | Please think from an inter bank perspective. You buy low and sell high to pocket a profit in the market. When you sell 1 NZD, essentially you are selling at the inter bank buying quote which is 0.8248 USD |
| jejemike | rule of thumb implied bid quote(x/y)= bid(x/z) * bid(z/y) = bid(x/z) * 1/offer(y/z) |
| skarthi146 | Gouldenone2, In CFA Curriculum: the way currency are quoted as "price ccy / base ccy": what is the price of 1 unit of base ccy in terms of price ccy. So, in USD/NZD quote, the rate given is the price you pay (or get) in USD per 1 unit of NZD. (it means for 1 unit of NZD, customers can get 0.8248 USD or customer can get 1 unit of NZD by paying USD 0.8286) |
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Learning Outcome Statements
calculate and interpret the bid-ask spread on a spot or forward foreign currency quotation and describe the factors that affect the bid-offer spread;
identify a triangular arbitrage opportunity and calculate its profit, given the bid-offer quotations for three currencies;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.