CFA CFA Level 1 Need help with Cross Currency Question

# Need help with Cross Currency Question

Topic Resolution: Resolved
• This topic has 4 replies, 4 voices, and was last updated Mar-232:33 am by IMFM.
• Author
Posts
• IMFM
Participant
• CFA Level 1
6

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 isÂ closestÂ to:

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

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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 NZDÂ  –> 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.

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

Thank you!

• KajalDighe
Participant
• CFA Level 1
4

We need to find how much NZD can 1 SGD buyÂ  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)

• jinkai
Participant
• CFA Level 1
1

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?

• IMFM
Participant
• CFA Level 1
3

Thank you, KajalDighe!