### CFA Practice Question

There are 581 practice questions for this topic.

### CFA Practice Question

Suppose the Brazilian real is quoted at \$:R = 0.9955 - 1.0076 and the Thai baht is quoted at \$:B = 25.2513 - 3986. What is the direct quote for the real in Bangkok (R:B)?

A. 30.5541 - 6456
B. 25.1376 - 2654
C. 25.0608 - 5134

Bid cross rate for the real (R:B) = 25.2513/1.0076 = 25.0608
Ask cross rate for the real = 25.3986/0.9955 = 25.5134
Therefore, the direct quotes for the real in Bangkok (R:B) are 25.0608 - 5134.

User Comment
schweitzdm I can't be the only one loathing this section
robbiecow Best way to think about this is if you get it the question in Bid-Ask format and are asked for the cross rate just think of the letter "X" for cross and align each Bid-Ask to the correct point.
ankurwa10 Please explain the entire approach Robbiecow, including how you solved it. Thanks
ankurwa10 On second thoughts, here's how I got the answer right. Don't know if the approach is right.

the concept of cross-currency is that: you sell one currency (GBP) to get some \$; and then use this \$ to buy another currency (Bhat)

now, when selling GBP --> you need the highest price, so use the ask rate.

i.e. since \$:R => R/\$ = 1.0076 (remember the reading where it says that if S => a:b (in division terms it is b/a)

when buying Bhat --> you need the cheapest price, so use the bid rate.

i.e. since \$:B => B/\$ = 25.2513

Now, solve to eliminate the \$, you get R/B = 25.2513 and since R/B => B:R which is the Direct quote for Bhat:GBP.

What I am confused about is why do separate bid/ask rate calculations. Also, does the concept I outlined above apply to this method (that of calculating bid and ask spread)
oprea_cl QUICK TIP: If the BASE currency is on:
1. Same side - cross divide the quotes (larger nr / smaller number)
2. Different sides - multiply same side
Price/Base bid - sell base

THB/BRL bid - value of THB received when selling 1 BRL (sell base)

you only need to calculate 1 to eliminate the other answers. I chose to find the bid by seeing how much THB i get for selling 1 BRL

Sell 1 BRL & Buy 'x' USD - use ask price of BRL/USD because you're buying base:

[invert the ask price to end in USD and not BRL^2/USD]
x = 0.992457 USD/BRL * 1 BRL
x = 0.992457 USD

Sell USD & Buy 'y' THB - use bid price of THB/USD because now you're selling base:

bid = 25.2513 THB/USD
[don't invert because otherwise you'll end up with USD^2/THB]
y = 25.2513 THB/USD * 0.992457 USD
y = 25.0608 THB
ashish100 Find value 1 unit of currency used on both sides.

Use two values and equal them together

THEN BOOM
skarthi146 if we are clear on two things then we can tackle any combination

1) if A/B bid - offer is given, then
B/A bid = 1 / A/B offer
B/A ask = 1/ A/B bid

2) A/B and B/C bids and asks are given and if we need to compute A/C bid-ask then we can get it by direct multiplication (i mean A/B * B/C, B cancels out and A/C remains).
A/C bid = A/B bid * B/C bid