Q1. The 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)   0.0003 BYZ/VEN

B)   0.05 VEN/BYZ

C)   0.05 BYZ/VEN

Q2. Assume 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 GBP/USD.

B)   0.000772 USD/GBP.

C)   0.002300 USD/GBP.

Q3. Which of the following statements best describes a six month forward foreign currency spread? The six month forward foreign currency spread:

A)   is the same as the spot spread.

B)   tends to be smaller than the spot spread.

C)   tends to be larger than the spot spread.

Q4. An 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)   USD339.13.

B)   USD2,340.00.

C)   USD56.52.

Q5. In an attempt to reduce her inventory, a dealer holding excess foreign currency should:

A)   move the midpoint of her direct quote up.

B)   quote a narrower bid-ask spread.

C)   move the midpoint of her direct quote down.

Q6. If the liquidity on a foreign currency forward contract decreases, the direct quote:

A)   and the indirect quote spreads will widen.

B)   spread will narrow and the indirect quote spread will widen.

C)   spread will widen and the indirect quote spread will narrow.

答案和详解如下：

Q1. The 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)   0.0003 BYZ/VEN

B)   0.05 VEN/BYZ

C)   0.05 BYZ/VEN

Correct answer is A)

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.

Q2. Assume 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 GBP/USD.

B)   0.000772 USD/GBP.

C)   0.002300 USD/GBP.

Correct answer is A)

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

Q3. Which of the following statements best describes a six month forward foreign currency spread? The six month forward foreign currency spread:

A)   is the same as the spot spread.

B)   tends to be smaller than the spot spread.

C)   tends to be larger than the spot spread.

Correct answer is C)

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

Q4. An 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)   USD339.13.

B)   USD2,340.00.

C)   USD56.52.

Correct answer is A)

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

Q5. In an attempt to reduce her inventory, a dealer holding excess foreign currency should:

A)   move the midpoint of her direct quote up.

B)   quote a narrower bid-ask spread.

C)   move the midpoint of her direct quote down.

Correct answer is C)

To reduce inventory, a dealer holding excess foreign currency should move the midpoint of her direct quote down. If the dealer narrows the spread, her bid price would rise at a time when she does not want to buy.

Q6. If the liquidity on a foreign currency forward contract decreases, the direct quote:

A)   and the indirect quote spreads will widen.

B)   spread will narrow and the indirect quote spread will widen.

C)   spread will widen and the indirect quote spread will narrow.

Correct answer is A)

Both the direct quote and the indirect quote spreads will widen as the liquidity on a foreign currency forward decreases.