- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 10. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 1. Foreign Exchange Spot Markets
CFA Practice Question
Given the spot rate quotes in the interbank market (BRL is Brazilian Real, and ARS is Argentine Peso):
BRL/USD: 2.0307 - 2.0348, ARS/USD: 4.2838 - 4.2880.
What is the implied bid-ask ARS/BRL cross rate?
A. 2.1073 - 2.1095.
B. 2.1053 - 2.1116.
C. 2.1053 - 2.1095.
Explanation: ARS/BRL = ARS/USD x (BRL/USD)-1. We need to invert the BRL/USD quotes and interchange bid and offer, we get:
Ask: 4.2880/2.0307 = 2.1116.
Bid: 4.2838/2.0348 = 2.1053.
Ask: 4.2880/2.0307 = 2.1116.
User Contributed Comments 1
User | Comment |
---|---|
janis36 | Always choose the most expensive option. |