$/Euro is quoted 1.412/1.415. What is the spread for the indirect quote in the US? I am not posting the multiple choice on purpose. I want to see if anyone made the same mistake as me. I’ll put up the choices in bout half an hr.
Hi, Spread in % is needed, right? I got 0.21% = [1/1.412 - 1/1.415]/[1/1.412] Is this answer among the ones given?
Spread % = A-B/A
(.70822 - .70671 )/.70822 = .00213
OK…you guys are getting the right answer…its 0.21201%. There was another choice as -0.21201% and I chose that instead. So, just to confirm, yield spreads can’t be negative i.e. they are absolute values. Right?
where did yields come into this? wibble.
Yep. Spread is the source of currency dealers earnings. It can not be negative !
yea…my bad christmas…i was simultaneosly doing a bond problem while replying here…i think i am going to take a break…
Correct. Spreads are an absolute value. Seems to me that if you forget any of the formulae, its easier to deduce the answers on Q’s like this. I’ve noticed that going through the practice Q’s that i’ve totally messed a gimme question by trying to remember a formula and theory. … Maybe I need a reading comprehension course…