Price and Base Currency

CFA Level III
#1

Please see the following Presentation: http://www.cfainstitute.org/learning/products/publications/inv/Documents/economics_investment_chapter_9.pptx

Now go to slide 2. The Foreign Exchange Market

On the left panel, it is mentioned that A** /B = Number of units of A that one unit of B will buy**

Going by above logic, USD/INR = Number of units of USD that one unit of INR will buy = 61.965

Am I wrong?

#2

I believe you have it flipped. 1 USD = 61.965 INR (when I checked last).

so it should be 61.965 INR/USD

#3

Did you see the particular slide I mentioned (see the link in my post above). I have copied pasted from there.

And hence the confusion.

#4

They have changed convention in all the cfai material in the last couple of years … so any older material may not be referring to currencies the same way. I am still not sure if that is how the rest of the world sees currencies, however you are in a cfai world, so go with the current convention.

#5

Do you mean that the information in the slide is incorrect/oversight?

Btw, they mention “Copyright © 2014 CFA Institute” on that particular slide. Don’t think the conventions would have changed post they prepared it.

#6

You are very familiar with the USD and the INR. you know 1 USD = 61.956 INR - so why aren’t you questioning that and sending a note to the author - saying his convention and exchange rate is OFF by way too much.

and it should be 61.956 INR/USD -> meaning 1 USD = 61.956 INR.

#7

I just want to understand the concept for the purpose of exam.

When they use such nomenclature on the exam, is this the right way to say:

A/B = Number of units of A that one unit of B will buy

Or should it be

A/B = Number of units of B that one unit of A will buy

#8

CFA Institute’s current convention is that A/B 1.2345 means A1.2345 = B1.0: it’s the number of units of A you need to buy one unit of B.

That’s all you need to know. This year. Next year it may change.

#9

I know it’s confusing as even in the real world (at banks etc), I always see USD/INR, USD/MXN, USD/BRL etc and never the other way round. But for exam purpose, just flip it.

#10

Thanks for the confirmation and thats how I have tried to learn the material.

No room for any confusion now.