Fixed Income – Level I CFA® Exam Es ...
Reading 42 – Fixed-Income Securities: Defining Elements A bond is a debt instrument... 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.
Let’s say you are given:
First, we need to set up the equation:
USD/CAD x CAD/GBP x GBP/EUR
= USD/
CADÂ xÂCAD/GBPÂ xÂGBP/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 =Â 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 =Â 0.54
- GBP/EUR =Â 1.28
USD/EUR = 1.28 x 0.54 x 1.28 =Â 0.88
If you would like to practice questions on this topic, consider our CFA Level 1 Question Bank.
Simon
simon.royal@analystprep.com
All 3 Levels of the CFA Exam – Complete Course offered by AnalystPrep
Photo by Maria Imelda on Unsplash
Reading 42 – Fixed-Income Securities: Defining Elements A bond is a debt instrument... Read More
The CFA Institute policy on exam calculators states that only two models are... Read More