Cross Rates Washi Co — OpenTuition Forums

JJames85002y ago

Hi, query re Cross rates from Washi Co (Sep18) JPY/EUR 129.2-132.4 ARD/EUR 92.7-95.6 If we are given a spread, can we use the mid-points to produce a cross rate: JPY/1EUR (129.2+132.4)/2 130.80 ARD/1EUR (92.7+95.6)/2 94.15 JPY/ARD 1.3892 (130.8/94.15) ARD/JPY 0.7198 (94.15/130.8) The above yields a different answer but is it acceptable in the exam? Additionally, does it matter which rate I use in the question (1.3892 or 0.7198)? Thanks

John MoffatAdmin2y ago#1

No - you should not use mid-points to calculate the cross rate. (f you do you will lose marks, but not so many marks provided that everything else is done correctly :-) )

JJames85002y ago#2

Ok thanks. In terms of Washi Co, I do not understand which sides of the spread to use when calculating the cross rate. Finding the logic behind the solution difficult. JPY/EUR 129.2-132.4 ARD/EUR 92.7-95.6 Cross rate: 132.4/92.7 = 0.70 Why not 129.2/95.7? This yields 0.74 I have been through the below thread - just not grasping it. https://opentuition.com/topic/cross-rates-washi-sep-2018-kaplan-exam-kit/ Thanks

John MoffatAdmin2y ago#3

For the initial investment they need to buy ARD. 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 (for the ARD receipts it works the other way round and the examiner should have used 0.74).

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