How LinkedIn Can Help a CFA® Program ...
Studying to become a Certified Financial Analyst isn’t a cakewalk by any standards.... Read More
In this short post, we’ll be looking at calculating currency cross rates. If you understand how to do these calculations, this will give you easy points in your CFA exam.
This is the 3 steps process to calculate currency cross rates:
- Set up the equation.
- Divide by 1 to switch the numerator and denominator of a spot rate you do not have.
- Multiply the spot rates.
Example
Let’s say you are given:
- EUR/GBP = 0.78
- CAD/GBP = 0.54
- USD/CAD = 1.28
What is the USD/EUR spot rate?
First, we need to set up the equation:
USD/CAD x CAD/GBP x GBP/EUR
= USD/
CADxCAD/GBPxGBP/EUR = USD/EUR
But we don’t have GBP/EUR, so we will have to divide the spot rate by 1.
GBP/EUR = 1/EUR/GPB = 1/0.78 = 1.28
Then, when we have every spot rate, we simply multiply everything:
USD/CAD x CAD/GBP x GBP/EUR
- USD/CAD = 1.28
- CAD/GBP = 0.54
- GBP/EUR = 1.28
USD/EUR = 1.28 x 0.54 x 1.28 = 0.88
If you would like to practice questions on this topic, consider our CFA Level 1 Question Bank.
Simon
simon.royal@analystprep.com
Photo by Maria Imelda on Unsplash
Start Free Trial →
Strengthen your understanding of currency cross rates with AnalystPrep study notes, practice questions, and mock exams.
Offered by AnalystPrep
sindhushree reddy
2021-01-07
Crisp and short ppt of Frm chapters and great explanation with examples.
Hui Ni
2020-12-18
Thanks for the effort and time spent in making these wonderful video! Not only did it help with it academically, it makes me feel motivated and comfortable that have someone guiding me through every chapter after chapter! Appreciated very much! ?
Geoff Graae
2020-12-18
With the help of analystprep I cleared both FRM 1 & 2. The videos posted online are some of the best resources I used and I would recommend them for anyone looking to clear this program. Thank you!!
Nithin Nallusamy
2020-12-09
FRM instructional videos was very helpful for my exam preparation! Prof.James is such a good heart and his way of teaching is impressive! Thanks a lot prof for free YouTube videos...
Isha Shahid
2020-11-21
Literally the best youtube teacher out there. I prefer taking his lectures than my own course lecturer cause he explains with such clarity and simplicity.
Artur Stypułkowski
2020-11-06
Excellent quality, free materials. Great work!
Ahmad S. Hilal
2020-11-03
One of the best FRM material provider.
Very helpful chapters explanations on youtube by professor James Forjan.
