CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

The current exchange rate for Japanese yen is ¥:$ = 0.008415. For a U.S. investor, this is an example of ______.
A. an indirect quote
B. a cross-rate quote
C. a direct quote
Explanation: A direct quote provides the home currency price of a specific quantity of foreign currency. An indirect quote states the foreign currency price of one unit of home currency.

User Contributed Comments 2

User Comment
Lambo83 Not according to the CFA material. This would be an indirect quote.
editor According to the required reading, quote: A direct currency quote takes the domestic country as the price currency and the foreign country as the base currency. For example, for a Paris-based trader, the domestic currency would be the euro (EUR) and a foreign currency would be the UK pound (GBP). For this Paris-based trader, a direct quote would be EUR/GBP. An exchange rate quote of EUR/GBP = 1.2225 means that 1 GBP costs 1.2225 EUR.

In this case, for a U.S. investor, a direct quote is USD/JPY. Note JPY:USD is actually USD/JPY. This is also based on the textbook. Quote: Third, when both currencies are mentioned in the code or the name convention, the base currency is always mentioned first, the opposite order of the actual ratio (price currency/base currency). Thus, the code for "Sterling–yen" is "GBPJPY," but the actual number quoted is the number of yen per sterling (JPY/GBP).
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