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Hi John
I cannot get round my head how cross rates have been worked/derived in this question:
Spot rates JPY per €1 are 129.2-132.40
Spot rates ARD per €1 are 92.7-95.60Inflation in Airone (currency ARD) is 9%
Inflation in Japan (currency JPY) is 1.5%I need to convert ARD 10,150m to JPY….
Can you please assist?
Thank you.
1 EUR buys 92.7 ARD, and 132.4 JPY will buy 1 EUR
Therefore 132.4 JPY will buy 92.7 ARD
Therefore 1 JPY will buy 92.7/132.4 = 0.70 ARD
It is the same logic for the other rate
Why do we use the 0.70 and not the 0.74 exchange rate for the investment appraisal? Since we transfer ARD to YPY, we sell ARD?
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