This question is from Q-Bank. The correct answer is B but why not D? Thanks in Advance. 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) 1.6771-1.9733. B) 0.50675-0.59627. C) 3.3844-3.5397. D) 0.53749-0.56216.
This type of question has been discussed all along in this forum. When you convert from direct to indirect quotes (and vice versa), bid becomes ask and ask becomes bid. Remember bid=buy, ask=sell. The rate you buy currency must be lower than the rate you sell it. Otherwise, you give people money for free or at your own loss. The question gives SF/ and DKK/. To calculate SF/DKK, we have to take reciprocal of DKK/ quote first. /DKK bid-ask (1/2.5843)-(1/2.4365) Initially we have SF/ bid-ask 1.3096-1.4528 SF/DKK= SF/ x $/DKK Bid SF/DKK = 1.3096 x (1/2.5843)=0.50675 Ask SF/DKK= 1.4528 x (1/2.4365)=0.59627 ==> B is the answer
Thanks Sondin. I think I’ll remember it now.