Currency Exchange Rates - what to expect?

CFA Level II Economics
#1

I just finished a reading of Currency Exchange Rates in Economics and the only portion that I understood (and would probably retain well till the exam) was the initial part of the currency exchange rates chapter (with the triangular arbitrage, int. rate parity, PPP calculations and the other calculation based stuff). Most of the theoretical stuff went over my head.

Now, is there a need to memorize the theoretical stuff (I’ve given up hope of understanding it) or could I expect that the calculation based parts are all that we’d be tested on in the exam?

#2

I found that the Econ topic tests had a good deal of qualitative/theory questions, so if you have the time see if you can internalize it a bit better.

Of course, you can always take a shot at the Econ topic tests and see how you do?

#3

Makes sense. Thanks BlackMamba!

Practicing questions and looking at the answer explanations has generally served me well for understanding stuff. I’ll re-read the material quickly and try and do as many questions as possible.

#4

That’s your best bet I think with just a little more than a week until the exam. Best of luck!

#5

econ is brutal at L2 i think. the amount of nuanced qualitative material you have to know, relative to how much of it will show up on the exam per the weights is a large discrepancy. I did all 7 econ TTs and (somehow) got an aggregate score of 32/42. I felt like i guessed on ALOT.

#6

I’m pretty confident there’s only 5% on this.

I dont worry too much about Eco

#7

You should know how to compute Forward rates under the covered interest rate parity using Spot price and Inflation rates

More specifically, you should memorize the following formula:

Forward_foreign/domestic = Spot_foreign/domestic x (1 + r_foreign) / (1 + r_domestic)