Bid/Ask Exchange Rates Problem, Help.

CFA Level I
#1

Hello, First time posting on here but have had great success finding solutions to my problems in the past. I have a curly question regarding currency receipts and a quote for the spot price given “verbally” The problem is copied and pasted below and for reference the answer is A. I however cannot for the life of me obtain the answer.

  1. An Australian export company wishes to sell its euro receipts, € 500,000, through an FX dealer and receives the following quote: ‘Aussie euro spot is one-twenty fifty-five to sixty five’. What is the value of the export receipt?
  2. $407,664.09
  3. $407,996.74
  4. $612,750.00
  5. $613,250.58

I obtained the exchange rate as AUD/EUR=1.2055-65 then tried multiplying 1/1.2055(taking the bid price) by 500,000

this gave me 414,765.66.

If someone could please explain where I have gone wrong would be greatly appreciated.

James.

#2

I seems to be getting the same asnwer as you. Maybe the quotes are wrong. Going through thus route, 500,000/407,664.09 = 1.2265 This is the quote that will yield $407,664.09.

Waiting for others to make their contribution.