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sir, so far I have no problem in converting foreign currecny to home curreny. I just need to think for a moment. But I am scared that I would not be able to do this in pressurised exam condtion.
So.. would there be any tip for instantly knowing whether to divide or multiply?
Watch the first of my series of free lectures on the management of foreign exchange risk, because in the first of the lectures I spend time making sure that you can convert in the correct way using the correct rate 🙂
Obviously it is important to try and convert the right way in the exam otherwise everything that follows will end up being wrong. However don’t panic about it in the exam. Practice and hopefully you will do it the correct way, but it does illustrate again the importance of showing your workings properly in the exam in a way that is easy for the marker to follow. If you do convert the wrong way then obviously you will lose marks, but you can still get more than enough marks to pass the question if it is obvious to the marker that you are doing things the right way (even if you are using the wrong exchange rate!) 🙂
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Thank you sir 🙂
Hi Sir. I used to think I got confused on the difference between which exchange rate should be used (1·0292–1·0309) in the Dec 2018 Q2
I understand why its multiplication because CHF were being converted to USD but I still do not understand why they used the first quoted exchange rate instead of the second to multiply. I thought when you are receiving a foreign currency you buy from the bank the bank
They are received CHF and is you used the second rate they would receive more $’s. This could not possibly be the case because the reason for there being 2 rates is so that the bank can make a profit 🙂
If is always whichever rate is worst for the company.I do explain this with lots of examples in the first of my free lectures on foreign exchange risk management (and the ‘rule’ I use to determine quickly which rate to use).
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