Reading 18: Currency Exchange Rates-LOS c 习题精选 currency, involving, interpret, 2011, class

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Session 4: Economics for Valuation
Reading 18: Currency Exchange Rates

LOS c: Calculate and interpret currency cross rates, given two spot exchange quotations involving three currencies.

 

 

Given an exchange rate of CAD:USD 0.9250 and CHF:USD 1.6250 what is exchange rate quoted in CHF:CAD?

A) 1.7568.

B) 0.5692.

C) 1.5032.

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(CHF:USD 1.6250) / (CAD:USD 0.9250) = CHF:CAD 1.7568

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Given P the direct quotes in U.S. dollars for the Mexican peso (MXN) and the Peruvian nuevo sol (PEN), determine the PEN:MXN bid-ask cross rates. Select the closest correct answer.

MXN:USD Bid/Ask: 0.11001 - 0.11036

PEN:USD Bid/Ask: 0.28818 - 0.28918

A) PEN:MXN 2.62890 - 2.64630.

B) PEN:MXN 2.61127 - 2.62867.

C) PEN:MXN 0.38300 - 0.38554.

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This problem demonstrates the "Bid-Ask Matrix Method" to calculate the bid and ask quotes:

Step 1: Put the bid-ask quotes into a matrix. Use direct quotes in the common currency.

Currency	Bid	Ask
MXN	0.11001	0.11036
PEN	0.28818	0.28918

Step 2: "Divide Out" the diagonals and take the reciprocal. Remember that the quotes are direct quotes for a USD investor.

(Remember to put MXN in the numerator - because MXN is in the numerator of the quote we are asked to calculate.)

MXN_Bid / PEN_Ask = 0.11001 / 0.28918 = MXNEN 0.38042,

1 / MXNEN 0.38042 = PEN:MXN 2.62867

MXN_Ask / PEN_Bid = 0.11036 / 0.28818 = PEN:MXN 0.38296,

1 / MXNEN 0.38296 = PEN:MXN 2.61127

Step 3: Quote : The PEN:MXN Bid-Ask is:

(Note: The lower number from Step 2 is the bid, the higher number is the ask.)

PEN:MXN 2.61127 to 2.62867

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Given the following quotes, USD:GBP 2.0000 and USD:MXN 8.0000, calculate the direct GBP:MXN spot cross exchange rate.

A) 0.6250.

B) 4.0000.

C) 0.2500.

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If we had 1 GBP we could buy 0.50 USD. That 0.50 USD would buy 4 Pesos. Alternately, you can invert the first quote to read GBP:USD 0.5000. Then, 0.5000_GBP:USD x 8.0000_USD:MXN = 4.0000_GBP:MXN

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A bank in Canada is quoting USD:CAD bid 1.4950 ? ask 1.5005, and EUR:USD bid 0.9350 ? ask 0.9400. What is exchange rate bid and ask for EUR:CAD?

A) EUR:CAD 1.5904 ? 1.6048.

B) EUR:CAD 0.6254 ? 0.6264.

C) EUR:CAD 1.3978 ? 1.4105.

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First invert the EUR:USD quote by 1 / 0.9350 = 1.0695 and 1 / 0.9400 = 1.0638 for a quote of USD:EUR 1.0638 ? 1.069. Then set up a bid-ask matrix.

1.4950 / 1.0695 = EUR:CAD 1.3978

1.5005 / 1.0638 = EUR:CAD 1.4105

The EUR:CAD bid-ask quote is 1.3978 ? 1.4105

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Given the following quotes for the Canadian dollar (CAD) and the British pound (GBP), determine the GBP:CAD bid-ask spread. (Note: Carry calculations to at least five decimal places)

USD:CAD 1.59031 ? 1.59701
USD:GBP 0.69459 ? 0.69686

A) GBP:CAD 2.29921 ? 2.31631.

B) GBP:CAD 2.28211 ? 2.29921.

C) GBP:CAD 2.28957 ? 3.28863.

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We recommend using the following "Bid-Ask Matrix Method" to calculate the bid and ask quotes:

Step 1: Put the bid-ask quotes into a matrix as below:

Currency	Bid	Ask
USD:CAD	1.59031	1.59701
USD:GBP	0.69459	0.69686

Step 2: “Divide Out” the diagonals.(Remember to put CAD in the numerator - because CAD is in the numerator of the quote we are asked to calculate.)

CAD_Bid / GBP_Ask = 1.59031 / 0.69686 = GBP:CAD 2.28211

CAD_Ask / GBP_Bid = 1.59701 / 0.69459 = GBP:CAD 2.29921

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An analyst observes that the exchange rate for Mexican pesos is USD:MXN 8.0000, and the exchange rate for Polish zlotys is USDLN 6.0000. The PLN:MXN exchange rate is closest to:

A) 0.7500.

B) 1.3333.

C) 14.0000.

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The cross rate of PLN:MXN is (USD:MXN 8) / (USDLN 6) = 1.3333 PLN:MXN.

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The current spot rates for currency exchange are as follows: USD:THB 0.02240 and THB:AUD 23.89923. What is the AUD:USD spot cross exchange rate?

A) 0.00094.

B) 1.86796.

C) 0.53534.

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The AUD:USD cross rate is calculated in the following manner:

Step 1:  Multiply the two quotes together (THB will cancel out) to obtain USD:AUD as follows: USD:THB 0.02240 × THB:AUD 23.89923 = USD:AUD 0.53534.

Step 2: Take the reciprocal of this result to obtain AUD:USD as follows: 1 / USD:AUD 0.53534 = AUD:USD 1.86796

An alternative calculation method is as follows:

Step 1: Take the reciprocal of the USD:THB quote as:  1 / USD:THB 0.02240 = THB:USD 44.64286

Step 2: Divide this result by the THB:AUD quote as: THB:USD 44.64286 / THB:AUD 23.89923 = AUD:USD 1.86796

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Given the following bid-ask spreads, calculate the DKK:CHF bid ask spread:

• USD:CHF bid-ask 1.3096 ? 1.4528
• USDKK bid-ask 2.4365 ? 2.5843

A) 1.6771 ? 1.9733.

B) 0.53749 ? 0.56216.

C) 0.50675 ? 0.59627.

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Set up a bid-ask matrix using:

USD:CHF bid-ask 1.3096 ? 1.4528

USDKK bid-ask 2.4365 ? 2.5843

(USD:CHF 1.3096) / (USDKK 2.5843) = DKK:CHF 0.50675

(USD:CHF 1.4528) / (USDKK 2.4365) = DKK:CHF 0.59627

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If the CAD is trading at CAD:USD 0.6403 and the GBP is trading GBP:CAD 2.5207, the GBP:USD exchange rate is:

A) GBP:USD 1.6140.

B) GBP:USD 0.6196.

C) GBP:USD 3.9367.

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(CAD:USD 0.643) × (GBP:CAD 2.5207) = GBP:USD 1.6140.

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If the spot exchange rate between the British pound and the U.S. dollar is USD:GBP 0.7775, and the spot exchange rate between the Canadian dollar and the British pound is GBP:CAD 1.8325, what is the CAD:USA spot cross exchange rate?

A) 0.70186.

B) 1.42477.

C) 0.42428.

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First, convert USD:GBP 0.7775 to 1/0.7775 = GBP:USD 1.28617.

Then, divide GBP:USD 1.28617 by GBP:CAD 1.8325 = CAD:USD 0.70187.