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Basic Question 7 of 14
If the spot rate is $:CNY (Chinese yuan) = 6.3000 and the forward exchange rate is $:CNY = 6.3200, then the ______
B. dollar quotes at a 0.0200 CNY discount.
C. CNY quotes at a 0.0200 CNY premium.
A. dollar quotes at a 0.0200 CNY premium.
B. dollar quotes at a 0.0200 CNY discount.
C. CNY quotes at a 0.0200 CNY premium.
User Contributed Comments 4
| User | Comment |
|---|---|
| schweitzdm | I thought it was C. It seems this section will require nothing more than spamming Qbank and memorizing everything that way. |
| Teeto | you need 6.3 CNY to buy 1 USD today and 6.32 to buy it in the future. So USD becomes more expensive (costs more CNY) - a premium |
| Marinov | I agree with schweitz. A quote USDCNY means that 1 yuan buys 6,3 dollars not the other way round. Of course, we know from general knowledge that it is indeed 1 dollar that buys that 6,3 yuans but the wording is misleading. |
| davidt876 | Marinov the question quotes CNY/USD - not USDCNY.. so what mislead you? Price/Base means the 6.3 is quoted in CNY. The question's fine |
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Learning Outcome Statements
explain the arbitrage relationship between spot and forward exchange rates and interest rates, calculate a forward rate using points or in percentage terms, and interpret a forward discount or premium
CFA® 2025 Level I Curriculum, Volume 1, Module 8.