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If USD SGD 1.5423/33; SGD GBP 0.3323/33; GBP USD quotation is__________________

If USD SGD 1.542333; SGD GBP 0.332333; GBP USD quotation is__________________

Looking for the answer to the question below related to Financial Management ?

If USD SGD 1.5423/33; SGD GBP 0.3323/33; GBP USD quotation is__________________

 Options:

A. 1.9512/444
B. 1.9441/512
C. 1.9444/512
D. 1.9512/441

The Correct Answer Is:

  • B. 1.9441/512

The given exchange rate information provides us with the cross-rates between three currencies: USD (United States Dollar), SGD (Singapore Dollar), and GBP (British Pound). We can use this information to calculate the GBP/USD exchange rate. Let’s break down the problem step by step to understand why option B, 1.9441/512, is the correct answer, and why the other options are not correct.

First, we have the following exchange rates:

  1. USD/SGD: 1.5423/33
  2. SGD/GBP: 0.3323/33

We want to find the GBP/USD exchange rate. To do this, we’ll calculate it indirectly by converting SGD to USD and then USD to GBP.

Step 1: Calculate the SGD to USD exchange rate.

We know that 1 USD can be exchanged for 1.5423 SGD (the bid price) or 1.5433 SGD (the ask price). Therefore, the SGD to USD exchange rate can be calculated as the reciprocal of these values:

  • Bid price (USD/SGD): 1 / 1.5423 = 0.6485
  • Ask price (USD/SGD): 1 / 1.5433 = 0.6482

Now we have the SGD to USD exchange rate range: 0.6482/0.6485.

Step 2: Calculate the GBP to SGD exchange rate.

We are given the SGD/GBP exchange rate as 0.3323/33. To find the reciprocal of these values, we can calculate:

  • Bid price (GBP/SGD): 1 / 0.3323 = 3.0052
  • Ask price (GBP/SGD): 1 / 0.3333 = 3.0003

Now we have the GBP to SGD exchange rate range: 3.0003/3.0052.

Step 3: Calculate the GBP to USD exchange rate.

To find the GBP to USD exchange rate, we can multiply the SGD to USD and GBP to SGD exchange rates. We’ll use the bid price for the SGD/USD and GBP/SGD rates, as this will give us the highest possible GBP/USD exchange rate:

Bid price (GBP/USD) = Bid price (GBP/SGD) * Bid price (USD/SGD) Bid price (GBP/USD) = 3.0003 * 0.6485 = 1.94408355

So, the GBP to USD exchange rate is approximately 1.9441.

Now, let’s analyze the options and explain why the correct answer is B (1.9441/512) and why the other options are not correct:

A. 1.9512/444:

This option is incorrect. It suggests a higher exchange rate for GBP/USD compared to our calculated rate of 1.9441. The bid price of 1.9512 is higher than our calculated bid price, so this option cannot be correct.

C. 1.9444/512:

This option is incorrect as well. While the bid price of 1.9444 is close to our calculated bid price, it is still slightly higher. Additionally, the ask price of 1.9512 is not consistent with the bid-ask spread in the question, which is 0.3323/33 for SGD/GBP. This inconsistency makes this option incorrect.

D. 1.9512/441:

This option is also incorrect. The bid price of 1.9512 is higher than our calculated bid price of 1.9441, making it inconsistent with the provided exchange rates. Additionally, the ask price of 1.441 is not in line with the bid-ask spread for SGD/GBP, which is given as 0.3323/33. This inconsistency makes this option incorrect.

In summary, the correct answer is B (1.9441/512) because it is consistent with the bid-ask spread provided for SGD/GBP and is based on the calculations using the given exchange rates for USD/SGD and SGD/GBP. The other options are incorrect because they either suggest an exchange rate that is higher than the calculated rate, have inconsistencies in bid-ask spreads, or both.

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