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

土豆妮

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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土豆妮

Given a foreign currency quotation bid of $0.8955 and an ask of $0.9045 what is the percentage bid-ask spread, and who profits from it?

% Bid-Ask Spread

Profits?

A) 0.9950% Customer

B) 0.9950% Bank

C) 1.0050% Bank

土豆妮

Given a foreign currency quotation bid of $0.8955 and an ask of $0.9045 what is the percentage bid-ask spread, and who profits from it?

% Bid-Ask Spread

Profits?

A) 0.9950% Customer

B) 0.9950% Bank

C) 1.0050% Bank

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

= [(0.9045 ? 0.8955) / 0.9045 ] × 100 = 0.9950%

The bid-ask spread is how banks make their profit on foreign currency transactions.

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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.

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Which of the following statements about foreign currency bid-ask spreads is least accurate? Foreign currency bid-ask spreads:

A) decrease as the size of the transaction decreases.

B) are not directly affected by bank and currency dealer positions.

C) are a function of transaction volume and volatility.

土豆妮

Which of the following statements about foreign currency bid-ask spreads is least accurate? Foreign currency bid-ask spreads:

A) decrease as the size of the transaction decreases.

B) are not directly affected by bank and currency dealer positions.

C) are a function of transaction volume and volatility.

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Bid-ask spreads are size related in that the smaller the transaction the larger the spread.

土豆妮

The percentage spread between foreign currency quotations is equal to the:

A) ask price minus the bid price divided by the bid price multiplied by 100.

B) ask price minus the bid price divided by the ask price multiplied by 100.

C) ask price divided by the bid price.

土豆妮

The percentage spread between foreign currency quotations is equal to the:

A) ask price minus the bid price divided by the bid price multiplied by 100.

B) ask price minus the bid price divided by the ask price multiplied by 100.

C) ask price divided by the bid price.

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% spread = [(ask price – bid price) / ask price] × 100