Today’s spot NZD:USD ask exchange rate is 0.6010, and the bid is 0.6000. The percentage spread on the _ USD _ is:
A. 0.6600%.
B. 0.1664%.
c. 0.3593%.
Explain.
I would say B - the spread on the USD, I think , should be in the form of the direct quote to the NZD. It is the New Zealander that is concerned with the price of the USD. Percentage should be as % of the Ask.
USD:NZD BID = 1/.6010
USD:NZD ASK = 1/.6
B = 1.6639
A = 1.6667
A - B / A
1.6667 - 1.6639 /(1.6667) = .0016639 = .1664%
Correct. The reason I posted this is because if you try to round this to any thing less than 4 decimal places, you’ll get a big difference. Point taken, don’t round with exchange rates! For example, 1.67-1.66/1.67 = 0.5988%.
Good point…I consistently notice that the # of decimal places does matter significantly on the exam. Would it be a good idea to increase it to 5 places in your calculator?
I use 6 places, but I tend to round anyway!