6． American wants to buy six cases of champagne. Each case costs 390 SEK. If the SEK/USD exchange rate is 6.90, what is the USD cost of the champagne?

A)   USD2,340.00.

B)   USD56.52.

C)   USD241.50.

D)   USD339.13.

7．hich of the following statements best describes a six month forward foreign currency spread? The six month forward foreign currency spread:

A)   tends to be smaller than the spot spread.

B)   tends to be larger than the spot spread.

C)   is the same as the spot spread.

D)   is equal to: (spot spread × (1 + 1/6)).

8．sume that the USD/GBP six-month forward rate is quoted at a bid of 1.72546 and an ask of 1.72776. What is the spread on the indirect quote for a U.S. dealer?

A)   0.000772 USD/GBP.

B)   0.002300 USD/GBP.

C)   0.002300 GBP/USD.

D)   0.000772 GBP/USD.

9．e three-month forward rate for the Byzantine solidus (BYZ) against the Venetian ducat (VEN) is quoted as 11.98 – 12.03 VEN/BYZ. The bid-ask spread on the direct quote to a Byzantine investor is closest to:

A)   0.05 VEN/BYZ

B)   0.0003 BYZ/VEN

C)   0.05 BYZ/VEN

D)   0.0003 VEN/BYZ

6． American wants to buy six cases of champagne. Each case costs 390 SEK. If the SEK/USD exchange rate is 6.90, what is the USD cost of the champagne?

A)   USD2,340.00.

B)   USD56.52.

C)   USD241.50.

D)   USD339.13.

The correct answer was D)

Total SEK cost = 390 × 6 = 2,340 SEK. Invert the quote = 1 / 6.9 = 0.1449 USD/SEK.
Total dollar cost = 0.1449 USD/SEK × 2,340 SEK = USD339.13

7．hich of the following statements best describes a six month forward foreign currency spread? The six month forward foreign currency spread:

A)   tends to be smaller than the spot spread.

B)   tends to be larger than the spot spread.

C)   is the same as the spot spread.

D)   is equal to: (spot spread × (1 + 1/6)).

The correct answer was B)     

The forward foreign currency spreads tend to be larger than the spot spreads.

8．sume that the USD/GBP six-month forward rate is quoted at a bid of 1.72546 and an ask of 1.72776. What is the spread on the indirect quote for a U.S. dealer?

A)   0.000772 USD/GBP.

B)   0.002300 USD/GBP.

C)   0.002300 GBP/USD.

D)   0.000772 GBP/USD.

The correct answer was D)

For an indirect quote, the bid and ask prices must be converted to GBP/USD. This is accomplished by taking the reciprocal of each and then subtracting the bid from the ask price.
1/1.72546 USD/GBP = 0.579556 GBP/USD
1/1.72776 USD/GBP = 0.578784 GBP/USD
The spread is 0.578784 – 0.579556 = 0.000772 GBP/USD

9．e three-month forward rate for the Byzantine solidus (BYZ) against the Venetian ducat (VEN) is quoted as 11.98 – 12.03 VEN/BYZ. The bid-ask spread on the direct quote to a Byzantine investor is closest to:

A)   0.05 VEN/BYZ

B)   0.0003 BYZ/VEN

C)   0.05 BYZ/VEN

D)   0.0003 VEN/BYZ

The correct answer was B)

The direct quote for a Byzantine investor is BYZ/VEN. The bid and ask quotes are 1/11.98 = 0.0834 BYZ/VEN and 1/12.03 = 0.0831 BYZ/VEN. The spread is 0.0834 - 0.0831 = 0.0003 BYZ/VEN.