- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Exchange Rate Calculations
- Subject 1. Cross-Rate Calculations
CFA Practice Question
Currency A is selling for $0.61 and the buying rate for Currency B is $0.19. The currency A : currency B cross rate is ______.
B. A:B = 0.81
C. Neither of these answers
A. A:B = 0.31
B. A:B = 0.81
C. Neither of these answers
Correct Answer: C
A:B = 0.61/0.19 = 3.21
User Contributed Comments 6
| User | Comment |
|---|---|
| VenkatB | from the dealer point of view.. A:$ = unknown bid - 0.61$/A B:$ = 0.19$/B - unknown ask The question asks us to find A:B = B/A = number f units of B needed to buy one unit of A From the investor standpoint : We start with 1 unit of B, and sell it to dealer and get 0.19$, we then take that 0.19$ and buy A (one unit of A sells for 0.61$, so 1$ will get us 1/.61 of A and 0.19$ will get us .19/.61 of A = .311475 of A) so with one unit of B we can buy .311475 units of A To buy 1 unit of A, we need 1/.311475 units of B = 3.210526 ____________________________________________ or A:$ = unknown bid - 0.61$/A B:$ = 0.19$/B - unknown ask A:B = B/A = ($/A) / ($/B) = 0.61/0.19 |
| BryonBUI | I think this question doesn't involve a spread. Simply: A:B=(A:$)"divide"(B:$)=0.61/0.19 Notation used as in CFAI text. |
| quanttrader | it's a direct quote -- ie quote amt of fc in terms of dc |
| ankurwa10 | I second ByronBUI's approach. And Venkat, I believe the earlier reading mentioned that when S= A/B, implies the number of units of B needed to buy A. So it won't make sense, unless it is a direct quote. Which is the number of units of B needed to buy A would be expressed as B/A instead of A/B. |
| mtsimone | .61/x * x/.19 = .61/.19 = 3.211. Use a form where the unknown cancels out. |
| skarthi146 | given: USD/A = unknown bid / 0.61 offer USD/B = 0.19 bid / unknown offer question is: B/A = (USD/A) / (USD/B) = 0.61 / 0.19 = 3.21 |