Confusion in forex

Final 1067 views 3 replies

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?

 

Answer given is 0.3256

 

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.

Replies (3)
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
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??

 

 

Question 1:
 
1 CAD = .86$
1 Gmark = .28$
 
1Gmark = how many CAD
 
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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