Reading 18: Currency Exchange Rates-LOS b, (Part 2)习题精选 involved, div, Because, currency, class

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Session 4: Economics: Economics for Valuation
Reading 18: Currency Exchange Rates

LOS b, (Part 2): Explain how spreads on foreign currency quotations can differ as a result of market conditions, bank/dealer positions, and trading volume.

 

 

 

Because of the uncertainty involved in forward contracts, dealers will quote bid-ask spreads on longer-term forward contracts that are:

A) narrower.

B) shorter.

C) wider.

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Because of the uncertainty involved in forward contracts, dealers will quote bid-ask spreads on longer-term forward contracts that are:

A) narrower.

B) shorter.

C) wider.

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The further into the future the quote, the more volatile the price, and the wider the spread.

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A bank in the U.S. is quoting a bid of 0.9350 USD/CAD and an ask of 0.9400 USD/CAD. For a direct U.S. quote, what is the percentage spread?

A) 5.5500%.

B) 0.0053%.

C) 0.5319%.

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A bank in the U.S. is quoting a bid of 0.9350 USD/CAD and an ask of 0.9400 USD/CAD. For a direct U.S. quote, what is the percentage spread?

A) 5.5500%.

B) 0.0053%.

C) 0.5319%.

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% spread = (ask price ? bid price) / ask price × 100

(0.9400 ? 0.9350) / 0.9400 × 100 =

(0.005 / 0.9400) × 100 = 0.5319%

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Suppose the spot USD/CHF exchange rate quotation is 0.7910 - 0.7917. The percentage bid-ask spread on the USD is:

A) 0.0007%.

B) 8.8840%.

C) 0.0884%.

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Suppose the spot USD/CHF exchange rate quotation is 0.7910 - 0.7917. The percentage bid-ask spread on the USD is:

A) 0.0007%.

B) 8.8840%.

C) 0.0884%.

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The bid-ask spread = [(0.7917 ? 0.7910) / 0.7917] × 100 = 0.0884%

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A bid-ask spread on a foreign currency will be narrower the:

A) more actively traded the currency and the smaller the transaction.

B) less actively traded the currency and the smaller the transaction.

C) more actively traded the currency and the larger the transaction.

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A bid-ask spread on a foreign currency will be narrower the:

A) more actively traded the currency and the smaller the transaction.

B) less actively traded the currency and the smaller the transaction.

C) more actively traded the currency and the larger the transaction.

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The more actively a currency is traded, and the larger the transaction, the narrower the spread.

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Which of the following will cause a currency's bid-ask spread to widen? The:

A) government has recently become more stable.

B) bid-ask spread is for a small transaction rather than a large one.

C) bid-ask spread is a spot quote rather than a forward quote.

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Which of the following will cause a currency's bid-ask spread to widen? The:

A) government has recently become more stable.

B) bid-ask spread is for a small transaction rather than a large one.

C) bid-ask spread is a spot quote rather than a forward quote.

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The bid is the price at which the bank will buy foreign currency, and the ask is the price at which the bank will sell foreign currency. The more actively a currency is traded, the narrower the spread. Forward spreads are wider than spot spreads. The smaller the transaction size, the wider the spread. The greater the exchange-rate volatility, the greater the bid-ask spread.