CFA Practice Question

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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 ______.

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

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
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