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Confusion in forex

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B.Com, CA & CS FINAL

[ Scorecard : 1316]

Hello members..

I am studying Foreign Exchange Management and have landed in doubt in very basic question. Actually there are two questions which are creating doubt and they are as follows:

Que 1. If the Canadian dolllar is equal to \$ 0.86 and the German Mark is equal to \$ 0.28, what is the value of the German Mark in terms of Canadian dollars?

Que 2. If the German Mark is equal to \$ 0.35 and the French Franc is worth 0.31 German Mark, what is the franc/dollar exchange rate?

Answer given is 9.228 French Francs per dollar

I had absolutely no problems in reaching the answer to Question no. 1 but to the second question, I am getting confused as to how the answer has been calculated. Would it be right to assume that the quotes are indirect in Que 2 or the answer to the second question have been wrongly given.

Please guide me, though it is very elementary and fundamental to ask at this level.

Mr. JHA
CA-FINAL & M.COM

[ Scorecard : 7730]

Ans. of 2- 1GM=\$0.35 i.e. 1\$=2.857143 1FF=0.31GM i.e 1GM=3.22581 FF/\$=GM/\$ * FF/GM, then FF/\$=2.857143*3.22581=9.2166

Total thanks : 1 times

Neeraj Singh
B.Com, CA & CS FINAL

[ Scorecard : 1316]

 Originally posted by : Mr. JHA Ans. of 2- 1GM=\$0.35 i.e. 1\$=2.857143 1FF=0.31GM i.e 1GM=3.22581 FF/\$=GM/\$ * FF/GM, then FF/\$=2.857143*3.22581=9.2166

thanks for the answer. the quotes are indirect, right??

Nawaz
CA Final

[ Scorecard : 162]

Question 1:

1 Gmark = .28\$

1 Gmark = .28/.86 = .3256 CAD

Question 2:

1 Gmark = .35\$
1 FRF = .31 Gmark

1 \$ = how many FRF

1 FRF = .31*.35 \$ i.e .1085\$

therefore 1 \$ = 1/.1085 FRF (that would be equal to 9.228 FRF per \$)

Do not go for direct or indirect interpretation , just use logic and base currency in mind -  keep it simple.

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