CFA Level I · CFA Level I Exam · Exchange Rate Calculations
The EUR/USD spot rate (USD per 1 EUR) rises from 1.1000 to 1.1330. The percentage change in the value of the euro relative to the US dollar is closest to:
The euro appreciated by about 3.0% against the dollar. With USD per EUR quoted, the base currency is the euro, so the change is the new rate divided by the old rate minus one: 1.1330/1.1000 - 1 = 3.0%.
- A-3.0%
- B+3.0%Correct
- C+3.3%
Explanation
The price currency is USD and the base currency is EUR, so the change in the base currency is (1.1330 / 1.1000) - 1 = 0.0300, or +3.0%. The option of -3.0% has the wrong sign. The option of +3.3% subtracts the quotes and divides by the wrong denominator, or just takes the difference in the rates.
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