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CFA Level I · CFA Level I Exam · Exchange Rate Calculations

A dealer quotes JPY/USD 148.20/148.28 (bid/offer). A client wants to sell 1,000,000 USD to the dealer and receive yen. The yen amount received is closest to:

The client receives about 148,200,000 yen. The dealer buys the base currency, the dollar, at the bid of 148.20, so selling one million dollars yields 148.20 million yen, not the higher offer rate used when clients buy dollars.

  1. A148,200,000Correct
  2. B148,240,000
  3. C148,280,000

Explanation

The bid is the price at which the dealer buys the base currency (USD). The client selling USD receives the bid: 1,000,000 x 148.20 = 148,200,000 JPY. The offer would apply if the client were buying USD.

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