6.Given the following bid-ask spreads:  

§ SF/$ bid-ask 1.3096-1.4528  

§ DKK/$ bid-ask 2.4365-2.5843

Calculate the SF/DKK bid ask spread.

A)   0.50675-0.59627.

B)   1.6771-1.9733.

C)   3.3844-3.5397.

D)   0.53749-0.56216.

7.The current spot rates for currency exchange are as follows: Thai Baht to $ of 0.02240 THB/$ and Australian Dollar (AUD) to Thai Baht of 23.89923 AUD/THB. What is the $/AUD spot cross exchange rate?

A)   0.53534.

B)   10.52635.

C)   0.00094.

D)   1.86796.

8.An analyst observes that the exchange rate for Mexican pesos (MXN) is 8 per U.S. dollar (USD), and the exchange rate for Polish zlotys (PLN) is 6 per U.S. dollar. The MXN/PLN exchange rate is closest to:

A)   0.750.

B)   14.000.

C)   1.333.

D)   Cannot be determined with the data given.

9.Given the following quotes for the Canadian dollar (CAD) and the British pound (BP), determine the CAD/BP bid-ask spread. (Note: Carry calculations to at least five decimal places.)

CAD/$ Bid Ask 1.59031 - 1.59701 / CAD/$
BP/$ Bid Ask 0.69459 - 0.69686 / BP/$

A)   2.29921 - 2.31631 CAD/BP.

B)   2.28957 - 3.28863 CAD/BP.

C)   2.28211 - 2.29921 CAD/BP.

D)   0.43493 - 0.43819 CAD/BP.

10.A bank in Canada is quoting CAD/USD bid 1.4950 - ask 1.5005, and USD/EUR bid 0.9350 – ask 0.9400. What is exchange rate bid and ask for CAD/EUR?

A)   CAD/EUR bid 1.5904 - ask 1.6048.

B)   CAD/EUR bid 1.3978 - ask 1.4105.

C)   CAD/EUR bid 0.7154 - ask 0.7089.

D)   CAD/EUR bid 0.6254 - ask 0.6264.

11.Given the following quotes: 2.00 GBP/USD and 8.00 Pesos/USD, calculate the direct Pesos/GBP spot cross exchange rate.

A)   0.625.

B)   4.000.

C)   1.600.

D)   0.250.

12.Given P the direct quotes in U.S. dollars for the Mexican peso (MXN) and the Peruvian nuevo sol (PEN), determine the MXN/PEN bid-ask cross rates. Select the closest correct answer.

USD/MXN Bid/Ask: 0.11001 - 0.11036

USD/PEN Bid/Ask: 0.28818 - 0.28918

A)   MXN/PEN 2.62890 - 2.64630

B)   MXN/PEN 2.61127 - 2.62867

C)   MXN/PEN 0.03042 - 0.03296

D)   MXN/PEN 0.38300 - 0.38554

6.Given the following bid-ask spreads:  

§ SF/$ bid-ask 1.3096-1.4528  

§ DKK/$ bid-ask 2.4365-2.5843

Calculate the SF/DKK bid ask spread.

A)   0.50675-0.59627.

B)   1.6771-1.9733.

C)   3.3844-3.5397.

D)   0.53749-0.56216.

The correct answer was A)

Set up a bid-ask matrix using:

SF/$ bid-ask 1.3096-1.4528

DKK/$ bid-ask 2.4365-2.5843

(1.3096 SF/$) / (2.5843 DKK/$) = 0.50675 SF/DKK

(1.4528 SF/$) / (2.4365 DKK/$) = 0.59627 SF/DKK

7.The current spot rates for currency exchange are as follows: Thai Baht to $ of 0.02240 THB/$ and Australian Dollar (AUD) to Thai Baht of 23.89923 AUD/THB. What is the $/AUD spot cross exchange rate?

A)   0.53534.

B)   10.52635.

C)   0.00094.

D)   1.86796.

The correct answer was D)

The cross rate between $ and AUD is calculated in the following manner:

Step 1:  Multiply the two quotes together (THB will cancel out) to obtain AUD/$: 0.02240 THB/$ * 23.89923 AUD/THB = 0.53534 AUD/$.

Step 2: Take the reciprocal of this result to obtain $/AUD: 1 / 0.53534 AUD/$ = 1.86796 $/AUD

An alternative calculation method is as follows:

Step 1: Take the reciprocal of the THB/$ quote:  1 / 0.02240 THB/$ = 44.64286 $/THB

Step 2: Divide this result by the AUD/THB quote:   44.64286 $/THB / 23.89923 AUD/THB = 1.86796 $/AUD

8.An analyst observes that the exchange rate for Mexican pesos (MXN) is 8 per U.S. dollar (USD), and the exchange rate for Polish zlotys (PLN) is 6 per U.S. dollar. The MXN/PLN exchange rate is closest to:

A)   0.750.

B)   14.000.

C)   1.333.

D)   Cannot be determined with the data given.

The correct answer was C)

The cross rate of MXN/PLN is 8 MXN/USD / 6 PLN/USD = 1.333 MXN/PLN.

9.Given the following quotes for the Canadian dollar (CAD) and the British pound (BP), determine the CAD/BP bid-ask spread. (Note: Carry calculations to at least five decimal places.)

CAD/$ Bid Ask 1.59031 - 1.59701 / CAD/$
BP/$ Bid Ask 0.69459 - 0.69686 / BP/$

A)   2.29921 - 2.31631 CAD/BP.

B)   2.28957 - 3.28863 CAD/BP.

C)   2.28211 - 2.29921 CAD/BP.

D)   0.43493 - 0.43819 CAD/BP.

The correct answer was C)

We recommend using the following "Bid-Ask Matrix Method" to calculate the bid and ask quotes:

Step 1: Put the bid-ask quotes into a matrix as below:

Step 2: “Divide Out” the diagonals.(Remember to put CAD in the numerator - because CAD is in the numerator of the quote we are asked to calculate.)

CAD_Bid / BP_Ask = 1.59031 CAD/$ / 0.69686 BP/$ = 2.28211 CAD/BP_Bid

CAD_Ask / BP_Bid = 1.59701 CAD/$ / 0.69459 BP/$ = 2.29921 CAD/BP_Ask

10.A bank in Canada is quoting CAD/USD bid 1.4950 - ask 1.5005, and USD/EUR bid 0.9350 – ask 0.9400. What is exchange rate bid and ask for CAD/EUR?

A)   CAD/EUR bid 1.5904 - ask 1.6048.

B)   CAD/EUR bid 1.3978 - ask 1.4105.

C)   CAD/EUR bid 0.7154 - ask 0.7089.

D)   CAD/EUR bid 0.6254 - ask 0.6264.

The correct answer was B)

First invert the USD/EUR quote by 1/.9350 = 1.0695 and 1/.9400 = 1.0638 for a EUR/USD bid-ask spread of 1.0638 – 1.0695 EUR/USD. Then set up a bid-ask matrix.

1.4950/1.0695 = 1.3978 CAD/EUR

1.5005/1.0638 = 1.4105 CAD/EUR

The CAD/EUR bid-ask spread is 1.3978 – 1.4105

11.Given the following quotes: 2.00 GBP/USD and 8.00 Pesos/USD, calculate the direct Pesos/GBP spot cross exchange rate.

A)   0.625.

B)   4.000.

C)   1.600.

D)   0.250.

The correct answer was B)

The direct method of quoting currencies is domestic currency / foreign currency or GBP/Pesos. You need to calculate what one peso is worth in pounds, 8 / 2 = 4.

12.Given P the direct quotes in U.S. dollars for the Mexican peso (MXN) and the Peruvian nuevo sol (PEN), determine the MXN/PEN bid-ask cross rates. Select the closest correct answer.

USD/MXN Bid/Ask: 0.11001 - 0.11036

USD/PEN Bid/Ask: 0.28818 - 0.28918

A)   MXN/PEN 2.62890 - 2.64630

B)   MXN/PEN 2.61127 - 2.62867

C)   MXN/PEN 0.03042 - 0.03296

D)   MXN/PEN 0.38300 - 0.38554

The correct answer was B)

We recommend using the following "Bid-Ask Matrix Method" to calculate the bid and ask quotes:

Step 1: Put the bid-ask quotes into a matrix. Use direct quotes in the common currency.

Step 2: "Divide Out" the diagonals and take the reciprocal. Remember that the quotes are direct quotes for a USD investor.

(Remember to put MXN in the numerator - because MXN is in the numerator of the quote we are asked to calculate.)

MXN_Bid / PEN_Ask = 0.11001 USD/MXN / 0.28918 USD/PEN = 0.38042 PEN/MXN,

1 / 0.38042 PEN/MXN = 2.62867 MXN/PEN

MXN_Ask / PEN_Bid = 0.11036 USD/MXN / 0.28818 USD/PEN = 0.38296 MXN/PEN,

1 / 0.38296 PEN/MXN = 2.61127 MXN/PEN

Step 3: Quote : The MXN/PEN Bid-Ask is:

(Note: The lower number from Step 2 is the bid, the higher number is the ask.)

MXN/PEN 2.61127 to 2.62867