CFA Level I · CFA Level I Exam · Exchange Rate Calculations
An exchange rate is quoted as USD/EUR = 1.0800. In the price/base convention used in the CFA curriculum, this quote is most accurately interpreted as:
A USD/EUR quote of 1.0800 means one euro costs 1.0800 US dollars. The euro is the base currency, the one after the slash, and the dollar is the price currency, so the quote states the dollar price of one euro.
- A1 USD costs 1.0800 EUR.
- B1 EUR costs 1.0800 USD.Correct
- C1 EUR costs 1/1.0800 USD.
Explanation
In a price/base quote, the currency after the slash is the base currency and the one before it is the price currency. USD/EUR = 1.0800 means 1 unit of EUR (base) costs 1.0800 USD (price). The first option reverses the currencies.
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