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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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