Bid Ask question ask, percentage, question, exchange

Walex

Assume that the EUR:USD six-month forward exchange rate is quoted at 1.2102/1.2112. What is the bid-ask spread as a percentage of the ask price based on a direct quote for euros?
A)0.0848%.
B)0.0826%
C)0.0847%
What does it mean exactly for “a direct quote for euros”, does it mean a direct quote for Europeans, which would mean # of EUROS per USD, or a direct quote for US investors, which would be # of USD Per euros
I am so confused. it ‘s a simple question if I knew what the question was asking for.
Thanks

chunty

It’s been a long time…but direct quote is the price you pay to buy the euro….how much dollars you pay to get one euro. I think the spread is B. Warning: I haven’t reviewed that section since last year.

ba736

hehe I put B too , but that’s wrong , the Answer is C. a friend of mine put B as well. Its because I don’t know what they mean by ” a direct quote for Euros” but I think I get it now. They mean a direct quote in the perspective of Europeans, so EUR/USD is what they mean, amount of Euros per usd..

disiz64

(1.2112-1.2102)/1.2112. = 0.0826%
how do you come up with C?

noel

(0.82631-0.82563)/0.82631 = 0.08256 . Still B

SkipE99

Yes, I think vinnie is mixing the direct-indirect issue with the spread percentage.

badonkus

Here ya go..
Your answer: C was correct!
Our quote is in terms of the number of dollars per euro, and a direct quote for euros is the number of euros per dollar. So, we must invert the rates given to get USD:EUR = 0.8256/0.8263. The spread is the difference between the bid and the ask or 0.8263 ? 0.8256 = 0.0007. The spread as a percent of the ask price is (0.0007 / 0.8263) or 0.0847%. Rounding is per market convention.

bigredhockey55

Err its cuz they rounded it, thats it. so stpuid.

rgonzalez

Exact answer is 0.082667%, no where near 0.0847%. Don’t use this test services provider anymore!