CMA Final · Strategic Financial Management · Foreign Exchange Market
A bank quotes USD/INR spot as 83.00 and EUR/USD spot as 1.0800. What is the implied cross rate EUR/INR?
The cross rate EUR/INR is 89.64. Multiply the euro price in dollars, 1.0800, by the rupee price of a dollar, 83.00. Dividing instead would wrongly give 76.85, which uses the inverse of the euro quote.
- A76.85
- B89.64Correct
- C84.08
- D81.92
Explanation
EUR/INR = EUR/USD x USD/INR = 1.0800 x 83.00 = 89.64. Dividing 83 by 1.08 gives 76.85, which inverts the relationship and is wrong.
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