Just looking at the schweser notes on fwd premium/discounts on pg 268 and they have a quote as $/euro1.2. Is this quoting that one USD will buy 1.2euros or that it will cost 1.2USD to buy one euro.
from the text: "The fwd or discount is for the base currentcy (ie, the currency at the bottom of the quote). For example, if the spot is $/euro1.2 and the forward price is $1/euro1.25 we say that the euro is trading at a forward premium.
The quote is $1.20/€.
I suspect that the highlighted number ($ 1 /euro1.25) is a typo.
acc. to me /euro1.2 means 1 can buy 1.2 euros
I think it is 1.2 / Euro - and 1 Euro = 1.2 .
In an exam setting, the language would clearly indicate base currency and exchange rate. It would not use :€ notation, but would more likely state more clearly as /€ or dollars per euro.
yea this is really crappy in scswer
If you read the notations as given in CFAI book , its Price Currency / Base currency , In your example USD / EUR , EUR is the base currency (domestic currency) and USD is the Price Currency (Foreign) that means 1.2 USD = 1 EUR and if the fwd is 1.25 then EUR is trading at premium. Whats the confusion here ?
Firstly USD/EUR 1.2 would be 1.2 USD per EUR. Secondly, my observation suggests that CFA question are based on real world examples. In doubt (not advisable but good to use when confused) think logically what is the rate of USD/EUR in the market currently.
I think it is useful to understand the direct and indirect quotes. Cannot expect CFAI to give real examples all the time or worse case what if they give an uncommon exchange rate for ex: MTL/KES .