- CFA Exams
- CFA Exam: Level I 2021
- Study Session 5. Economics (2)
- Reading 18. Currency Exchange Rates
- Subject 3. 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**
5

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. |