Hi Rohit,

Your 2nd interpretation is correct.

Regards.

Originally posted by : Hemant Pandit
	Originally posted by : Sourav @ Bhakti and Hemant : Your interpretation is wrong...... I am 110 percent sure option 1 is correct..... U can confirm from any book or your sfm teacher..... @ sourav  i cleared first grp of CA final with 67 in SFm in may 14...

U have got 67 in SFM that doesnot mean you are God of SFM and u cannot be wrong......  The fact is you are wrong..... U can confirm with anyone....... Option 1 is correct..... I can challenge you..... Prove me wrong and I will quit CCI forever... 

I am not trying to hurt you..... But you should not be so arrogant..... U shud accept your mistake if you are wrong..... Marks doesnot matter..... So dont show off that you got 67.... 

Hahahh.. Sourav nailed it big time...

Cant believe this Hemant guy has got 67 in SFM bwhahaha :P
 

To err is human and to forgive is divine... :P

Many seem to be sure about the 1st interpretation. Since it contradicts my answer I am keen to know the reason if someone can help me. Many thanks.

Originally posted by : Bhatt Bhadresh
	Many seem to be sure about the 1st interpretation. Since it contradicts my answer I am keen to know the reason if someone can help me. Many thanks.

Spot rates are always given in bid/ask format.... In which bank agrees to buy at a low rate called bid and sell at a high rate called ask rate.... In other words it should always be in low/high format. So when a spot rate is given as 83.80/30 it should be interpreted as 83.80/84.30. This means the bank is agreeing to buy at 83.80 however it will sell at 84.30 and the margin will be its profit.

Option 2 would have been correct if it was written as 83.80/83.30 , i.e. the full form.... However if you ask any one who practises in real world, this would be termed as disgusting. This is against the common practise, unfortunately the question setters of our institute are not aware of the real world hence they commit this mistake.....

Thanks for your prompt response Sourav.

You've made a reasonable argument.

The 1st option is valid only in 2 cases. 1st being that there is a presence of a third currency, . 2nd being that we assume a spread of 0.50 and add.

There is no doubt that there is no 3rd currency to give rise to a cross rate.

Then if we direclty assume 84.30 as ask in absence of a spread, it will be theoretically incorrect as we would be ASSUMING the spread as 0.50 (84.3 - 83.8). We assume this because of practicality that the currency margins (84.3 - 83.8 = 0.50 in this case) are very minimal and hence apply this logic to theory and end up assuming that for a bid of 83.8 the margin of 0.50 is justifiable. Hence it has to be 84.30 only and not, say, 85.30. People always have access to full form of the quotes. However, as rightly said by you, for Rs/GBP or even Euros this short quoting possibility persists because the margins are not very high. But what about top bracket currencies such as the Kuwaiti Dinar. Suppose the indirect quote is 200.50/30. It is not only theoretically incorrect but also a practical mistake to assume that the ask in this case is 201.30 because the spread may be more than a rupee here. Hence, the point being, in absence of a spread such an assumption of spread may be used in practice for some currencies only but its definitely not the standard approach to theory. So this rules out the second option as the spread was just assumed.

Owing to the above option 2 seems to be more appropriate, albeit open for correction/discussion if anyone likes to weigh in. Sorry for the long post. Thanks for giving it a read.

Sorry Mr. Bhatt, i didnt get your point..... For all purpose option 1 is correct for our CA examination....  I have taken tution from CA Rajiv Singh and I have checked my notes upon which I am pretty sure option 1 is right... If u are a student I can provide you with Rajiv Sir's email id you can mail him, hope he would clarify your facts.....

I believe CA Nagendra is a SFM faculty for CA Final who uses CCI.... I am trying to PM him hoping that he could conclude this discussion.....

Originally posted by : Sourav
	Sorry Mr. Bhatt, i didnt get your point..... For all purpose option 1 is correct for our CA examination....  .

Hi Sourav, I think the point Mr.Bhatt wants to put across is regarding a scenario where the spread is greater than 1. For example, lets assume in the above example, the bid rate is 83.80 and the ask rate is 85.30(I know there isnt going to be such a huge spread in this case, but as Mr.Bhatt says, it happens so for some other currencies..so letz just make this assumption). Now how are you going to write this is in short form? 

Originally posted by : Sourav
	Originally posted by : Bhatt Bhadresh Option 2 would have been correct if it was written as 83.80/83.30 , i.e. the full form.... However if you ask any one who practises in real world, this would be termed as disgusting. This is against the common practise, unfortunately the question setters of our institute are not aware of the real world hence they commit this mistake.....

Well when I searched on net, it is everywhere shown in full form. If it isnt at all a common practice, why should the quotes be still shown in full form instead of short form? Actually I could not even in one instance see a quote in the short form..

Anyways as regards ur answer, I too think thats the right one since bid rate is always given as the first rate. But I want to know how this short form works when the difference is more than one.

Jithin, one more fact about examination.  

In practical world quotes are always written in ACI convention i.e USD/INR etc, however you may find in our exams quotes are given in symbols, which often confuses a student to find the base currency.....

ACI conventions are followed worldwide, unfortunately except our institute.....

@ Sukriti Jain

Well I havent actually contradicted with u guys' solution and I am never for additions/substractions. Since I dont hv any practical exposure in forex, I just wanted to know how u will be presenting the qoute when the spread is really large. And I got ur opinion.

Since u are saying that this is how the rates are practically presented, I wud like to see some links in that respect. All the quotes which I saw on net are in full form. Maybe when u go to a bank, they will be mentioning the rates in short form for the convenience of everybody. But I couldnt find the quotes presented that way when I checked on net.

Originally posted by : Sourav
	Jithin, one more fact about examination.   In practical world quotes are always written in ACI convention i.e USD/INR etc, however you may find in our exams quotes are given in symbols, which often confuses a student to find the base currency.....   ACI conventions are followed worldwide, unfortunately except our institute.....

Thanks for the input Sourav. Yup it wud be confusing if quotes are given in symbols. Anyways our Institute is a real expert on confusing students in exams,rite : )

I stand corrected. Ask is 84.30 for the very obvious reasons given in the previous replies.

Thanks Sourav and Sukriti for your help and time putting up with this debate.

Regards.

Thanx Sukriti for being an integral part of this debate and proving the true fact right.... Its not about proving me right... Its only about proving the right thing rite...... Infact Thanx to everbody..... Thanx to CCI also for providing such a platform where we can put forward our view points....