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
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.
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…
(1.2112-1.2102)/1.2112. = 0.0826% how do you come up with C?
(0.82631-0.82563)/0.82631 = 0.08256 . Still B
Yes, I think vinnie is mixing the direct-indirect issue with the spread percentage.
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.
Err its cuz they rounded it, thats it. so stpuid.
Exact answer is 0.082667%, no where near 0.0847%. Don’t use this test services provider anymore!