An Australian firm asks the bank for an A$/SFr quote because it received SFr and wants to change it to A$. A bank is quoting the following exchange rates against the US dollar for the Swiss franc and the Australian dollar:
SFr/US$ = 1.4950--60
A$/US$ = 1.6245--50
Calculate the cross ask rate for the A$/SFR by identifying the correct formula in the attached formula sheet.
One of the following answers will be correct:
a. Ask rate A$/SFr = 1.0862
b. Ask rate A$/SFr = 1.0866
c. Ask rate A$/SFr = 1.0859
d. Ask rate A$/SFr = 1.0870
Show your workings in the space provided as well as the correct answer.
For example write your answer as follows in the space provided below: Spot ask rate (A$/SFR) = 1.4670/1.3980 = 1.0494
Briefly explain (in one or two sentences) what the meaning is of the calculated A$/SFR ask rate.
Answer d. Ask rate A$/SFr = 1.0870
Now we make it easy
SFr/US$ = 1.4950Bid / 1.4960Ask
A$/US$ = 1.6245Bid / 1.6250Ask
Now calculate cross rate A$/SFr
A$/SFrBid = A$/US$Bid x US$/SFrBid = 1.6245 x 1/1.4960 = 1.0859
A$/SFrAsk = A$/US$Ask x US$/SFrAsk =1.6250 x 1/1.4950 = 1.0870
A$/SFr = 1.0859Bid / 1.0870Ask
The ask is the price a seller is willing to accept for a security, which is often referred to as the offer price. Along with the price, the ask quote might also stipulate the amount of the security available to be sold at the stated price. The bid is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid.
Ask rate of A$/SFr for australian firm is SFr is receivable and convert into A$. Here exchange rate is A$/SFr so selling rate is 1 / (A$/SFrAsk) Rate.
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