Reading 18: Currency Exchange Rates-LOS a 习题精选 2011, 肛裂

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

LOS a: Define direct and indirect methods of foreign exchange quotations, and convert direct (indirect) foreign exchange quotations into indirect (direct) foreign exchange quotations.

 

 

A U.S. importer wants to buy stuffed toys from the nation of South Apoa for a total cost of 6 million Apoas. The spot exchange rate is Apoa:USD 0.50. The USD equivalent cost is:

A) USD 12,000,000.

B) Apoa 3,000,000.

C) USD 3,000,000.

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$0.50 times 6,000,000 Apoa = USD 3,000,000.

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Given an indirect quote of GBP:CHF 2.2254, what is the direct quote?

A) CHF:GBP 4.4940.

B) CHF:GBP 0.0449.

C) CHF:GBP 0.4494.

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CHF:GBP 0.4494 is the reciprocal of GBP:CHF 2.2254.

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In the U.S., the indirect quote of USD:EUR 0.827541 is the equivalent of a direct quote of:

A) EUR:USD 1.2084.

B) EUR:USD 0.0012.

C) EUR:USD 0.1208.

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EUR:USD 1.2084 is the reciprocal of USD:EUR 0.827541.

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If the exchange rate value of the CAD goes from USD 0.60 to USD 0.80, then the CAD:

A) depreciated and Canadians will find U.S. goods more expensive.

B) depreciated and Canadians will find U.S. goods cheaper.

C) appreciated and Canadians will find U.S. goods cheaper.

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The CAD is now more expensive in terms of USD, and thus it has appreciated. Therefore, each CAD yields more USD than before, and Canadians are able to purchase more U.S. goods with each CAD, making U.S. goods relatively cheaper.

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In Japan, the direct quote of USD:JPY 108.82 is the equivalent of an indirect quote of:

A) JPY:USD 0.091895.

B) JPY:USD 0.009189.

C) JPY:USD 0.918949.

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JPY:USD 0.009189 is the reciprocal of USD:JPY 108.82.

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Suppose that the quote for the CAD in New York is CAD:USD 0.6666. What is the quote for USD in Toronto USD:CAD?

A) 1.5001.

B) 0.3333.

C) 1.0000.

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Take the reciprocal of 0.6666 = 1 / 0.6666 = 1.5001

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If the indirect quote for U.S. dollars in Sydney is 0.7927, what is the equivalent indirect quote in New York City for Australian dollars?

A) 0.3964.

B) 1.2615.

C) 0.7927.

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Indirect quotes are foreign currency per domestic currency or DC:FC. An indirect quote in Sydney for USD of 0.7927 means AUD:USD 0.7927 which equals an indirect quote in New York City of USD:AUD 1.26.

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An indirect quote for pesos to a $U.S. investor is 8.0000-8.5000. If you have $100, how many pesos will you be able to buy?

A) 800.

B) 11.8.

C) 850.

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For the examination, remember that the bank must make its profit through the bid-ask spread (the foreign-exchange market is typically transaction-fee free), so you will always buy at the "high" price and sell at the "low price." Here, the "high" price is 8.0000 USD:MXN (At 8.0000 USD:MXN the peso is worth more than at 8.5000 USD:MXN ).

$100.00 × 8.0000 = 800.0000 Pesos

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GBP:USD 0.5550 is:

A) a direct quote in Great Britain.

B) an indirect quote in the U.S.

C) an indirect quote in Great Britain.

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In country X, an indirect quote is foreign currency over domestic currency, or DC_X:FC.  The quote GBP:USD 0.5550 is DC:FC (or indirect) to an investor in Great Britain and FCC (or direct) to an investor in the United States.

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If the bid is GBP:USD 1.8709 and the ask is GBP:USD 1.8841, what is the bid?ask quote in USD:GBP?

A) 0.5345 ? 0.5407.

B) 1.8841 ? 1.8709.

C) 0.5308 ? 0.5345.

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To convert to USD:GBP just take the reciprocal of each number and reverse the bid?ask quote.

1 / (GBP:USD 1.8709) = USD:GBP 0.5345 and 1 / (GBP:USD 1.8841) = USD:GBP 0.5308. The bid?ask quote is now 0.5308 ? 0.5345.