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CMA Final · Strategic Financial Management · Foreign Exchange Market

A bank quotes USD/INR spot as 83.2000/83.2800 and GBP/USD as 1.2500/1.2540. Based on these quotes, what rate will the bank charge a customer who wants to buy GBP against INR (GBP/INR offer)?

The bank charges about Rs 104.43 per pound. When a customer buys GBP, the bank sells, so the cross rate uses the offer on each leg: 1.2540 multiplied by 83.2800 equals roughly 104.43. Using bid rates would understate the price the bank demands.

  1. A104.0000
  2. B104.4300Correct
  3. C104.4000
  4. D103.9900

Explanation

The bank sells GBP, so it applies the offer on both legs: GBP/USD offer 1.2540 x USD/INR offer 83.2800 = 104.4331, about 104.43. Option 104.00 uses both bid rates, which is wrong because the customer buys from the bank. Mixing bid and offer gives other incorrect figures.

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