i am having a problem differentiating a sign of / and : in currency qoutes. how do we treat each case. e.g. sport rate USD:IDR= 2400 USD:NZD=1.6 NZD/USD the cross rate IDR:NZD is a. .00067 b. 1492.53 c. 3840 please explain how to handle the / vs : sign
USD:IDR=2400 means 1 USD=2400 IDR or IDR/USD=2400 USD:NZD=1.6 means 1 USD=1.6 NZD or NZD/USD=1.6 they are asking for IDR:NZD or NZD/IDR = 1.6 / 2400 = 0.00067
sport rate JPY/USD=120 EUR/USD .7224 Inflation Eurozone=5% Japan inflation 0% use relative PPP expected JPY/EUR sport rate 2 years from now is: a. 150.57 b.158.29 c.166.74
First JPY/EUR = 120/.7224 = 166.11 so 2 years from now: 166.11 * [(1 + IYen)/(1+IEur)]^2 = 166.11 / 1.05^2 = 150.67 A)
Cp, my problem here was that i thought JPY/EUR means JPY is base currence and EUR is counter currency so according to the PPP Es= s* (1.IC/1.Ib)^t Does it means that when it JPY:EUR, JPY is base currence but whem its JPY/EUR , then EUR becomes base currency?
I do not look at base currency / counter currency etc. etc. I go Domestic/Foreign -> need to have same ratio for rates / inflation etc. so here JPY numerator, EUR denominator.
AudreyMwala Wrote: ------------------------------------------------------- > > Does it means that when it JPY:EUR, JPY is base > currence but whem its JPY/EUR , then EUR becomes > base currency? JPY:EUR (CFAI curriculum notation) is the same as EUR/JPY. Both means how much EUR you have to pay for one JPY. PPP: Domestic / Foreign * (1+rdomestic) / (1+rforeign)
domestic is the same as counter currency foreign is the same as base currency CFAI used domestic/ foreign Schweser on page 61 book 2 used base/counter so, my formula above i.e. s* (1.IC/1.Ib)^t is the same as your formula PPP: Domestic / Foreign * (1+rdomestic) / (1+rforeign)