Economics

Exchange Rate Calculations practice questions

Exchange Rate Calculations is part of CFA Level I Economics. Economics questions focus on microeconomics, macroeconomic policy, international trade, currency markets, and market structure logic. Use this page to review the controlling ideas, then work through 24 questions with answer explanations and common traps.

Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.

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What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Moderate

Economics

Exchange Rate Calculations

The JPY/USD exchange rate (yen per US dollar) moves from 140.00 to 147.00 over six months. Relative to the yen, the US dollar has most likely:

Easy

Economics

Exchange Rate Calculations

Under covered interest rate parity, the currency of the country with the lower interest rate most likely trades in the forward market at a:

Moderate

Economics

Exchange Rate Calculations

A dealer provides the following quotes: USD/EUR 1.1000-1.1010 and USD/GBP 1.3000-1.3010 (US dollars per unit of foreign currency, bid-offer). The EUR/GBP bid (euros per pound) is closest to:

Very Difficult

Economics

Exchange Rate Calculations

Spot USD/EUR is 1.0500. Six-month interest rates, stated on an annualized basis, are 4.0% in the United States and 2.0% in the euro area. Assuming simple interest for the six-month period, the six-month forward USD/EUR rate implied by covered interest rate parity is closest to:

Moderate

Economics

Exchange Rate Calculations

Given USD/EUR = 1.0800 and USD/GBP = 1.3500, the EUR/GBP cross-rate is closest to:

Moderate

Economics

Exchange Rate Calculations

Given JPY/USD = 150.00 and CHF/USD = 0.9000, the JPY/CHF cross-rate is closest to:

Moderate

Economics

Exchange Rate Calculations

Spot USD/EUR is 1.0860. Three-month forward points are +18.5, quoted in 1/10,000 units. The three-month forward USD/EUR rate is closest to:

Very Difficult

Economics

Exchange Rate Calculations

Spot CAD/USD is 1.3500 and the six-month forward CAD/USD rate is 1.3770. The annualized forward premium or discount for the US dollar is closest to:

Very Difficult

Economics

Exchange Rate Calculations

Spot USD/EUR is 1.1000. One-year interest rates are 5.0% in the United States and 2.0% in the euro area. Under covered interest parity, the one-year forward USD/EUR rate is closest to:

Very Difficult

Economics

Exchange Rate Calculations

Spot CHF/EUR is 0.9700. One-year interest rates are 1.0% in Switzerland and 3.0% in the euro area. Under covered interest parity, the one-year forward CHF/EUR rate is closest to:

Very Difficult

Economics

Exchange Rate Calculations

Spot USD/EUR is 1.2000 and spot USD/GBP is 1.5000. A dealer quotes EUR/GBP = 1.2200. Ignoring transaction costs, the most appropriate arbitrage is to:

Very Difficult

Economics

Exchange Rate Calculations

Spot JPY/USD is 145.20. One-year forward points are -320, where one point equals 0.01 yen. The one-year forward rate and interpretation are closest to:

Easy

Economics

Exchange Rate Calculations

If USD/EUR = 1.2000, the reciprocal quote EUR/USD is closest to:

Easy

Economics

Exchange Rate Calculations

A forward rate quoted above the spot rate in USD/EUR terms most likely means the euro is trading at a forward:

Easy

Economics

Exchange Rate Calculations

Covered interest rate parity is best described as:

Easy

Economics

Exchange Rate Calculations

Forward points of +0.0015 applied to a spot quote of CAD/USD = 1.3500 produce a forward quote of:

Moderate

Economics

Exchange Rate Calculations

Given USD/EUR = 1.1000 and USD/GBP = 1.3200, the EUR/GBP cross-rate is closest to:

Moderate

Economics

Exchange Rate Calculations

Spot USD/EUR = 1.1000. One-year interest rates are 4% in USD and 2% in EUR. Under covered interest parity, the one-year forward USD/EUR is closest to:

Moderate

Economics

Exchange Rate Calculations

Spot JPY/USD = 150.00 and the six-month forward quote is 147.00. The US dollar's six-month forward premium or discount versus the yen is closest to:

Moderate

Economics

Exchange Rate Calculations

A one-year forward USD/CHF is quoted at 0.9100 while spot USD/CHF is 0.9000. The Swiss franc is most likely trading at a forward:

Moderate

Economics

Exchange Rate Calculations

Spot EUR/GBP = 0.8600 and one-year forward EUR/GBP = 0.8514. The one-year forward premium or discount on GBP is closest to:

Very Difficult

Economics

Exchange Rate Calculations

Spot CAD/USD = 1.3500. Six-month interest rates are 2.0% in CAD and 3.0% in USD, stated for the six-month period. Under covered interest parity, the six-month forward CAD/USD is closest to:

Difficult

Economics

Exchange Rate Calculations

A dealer observes USD/EUR = 1.0800, USD/GBP = 1.2960, and EUR/GBP = 1.1800. Ignoring transaction costs, the most appropriate action is to:

Very Difficult

Economics

Exchange Rate Calculations

An analyst calculates a one-year forward USD/EUR of 1.1250 from covered interest parity while the spot rate is 1.1000. The most accurate interpretation is that: