CFA CFA Level 1 Need help with Cross Currency Question

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Need help with Cross Currency Question

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  • This topic has 4 replies, 4 voices, and was last updated Mar-232:33 am by IMFM.
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    • Avatar of IMFMIMFM
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        Question

        A New Zealand traveler returned from Singapore with SGD7,500 (Singapore dollars). A foreign exchange dealer provided the traveler with the following quotes:

        Ratio Spot Rates
        USD/SGD 1.2600
        NZD/USD 0.7670

        USD: US dollar; NZD: New Zealand dollar

        The amount of New Zealand dollars (NZD) that the traveler would receive for his Singapore dollars is closest to:

        1. NZD7,248.
        2. NZD4,565.
        3. NZD7,761.

        =========================================================================

        My answer

        1 NZD to 0.7670 USD –> 1 USD to 1.303781 NZD

        And 1 USD to 1.26 SGD

        So, 1.26 SGD to 1.303781 NZD  –> 1 SGD to 1.034747 NZD

        Since the traveler has SGD 7,500.00 in his pocket, he will received (1.034747 x 7,500.00 = 7,760.61) NZD.

        I chose answer 3.

        But it’s incorrect and the answer should be 1.

        Could anybody please help me on where did I gone wrong?

        Thank you!

        Zee Tan voted upBobatka voted up
      • Avatar of KajalDigheKajalDighe
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          We need to find how much NZD can 1 SGD buy  i.e NZD/SGD

          NZD/SGD = USD /SGD * NZD/USD

          = 1.2600 * 0.7670

          = 0.96642

          1SGD can buy 0.96642 NZD, he got 7500SGD which could buy 7248 NZD ( 7500* 0.96642)

          Zee Tan voted upBobatka voted up
          • Avatar of jinkaijinkai
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              Hi, I am new here so forgive me for my beginner level question but I am under the impression that how much NZD can 1 SGD buy be SGD/NZD i.e. 1SGD = ?NZD, can someone please correct me on this?

              e.g. EUR/USD refers to how much USD can 1 EUR buy?

               

          • Avatar of IMFMIMFM
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              Thank you, KajalDighe!

              KajalDighe voted upBobatka voted up
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