Trusted by Students Everywhere
Why Choose Us?
0% AI Guarantee

Human-written only.

24/7 Support

Anytime, anywhere.

Plagiarism Free

100% Original.

Expert Tutors

Masters & PhDs.

100% Confidential

Your privacy matters.

On-Time Delivery

Never miss a deadline.

Suppose the spot quote on the euro is $0

Business Sep 16, 2020

Suppose the spot quote on the euro is $0.9302-28, and the spot quote on the Swiss franc is $0.6180-95.How would I compute the percentage bid-ask spreads on the euro and franc?And what would the direct spot quote be for the franc in Frankfurt?

Expert Solution

please see the attached file.

1. The bid-ask spread is calculated as follows:

The percentage bid-ask spreads on the euro and franc are calculated as follows:

Euro bid-ask spread = (0.9328 - 0.9302)/0.9328 = 0.27%

SFr bid-ask spread = (0.6195 - 0.6180)/0.6195 = 0.24%

2. In order to sell one franc for euros, first sell the franc for $0.6180 and then convert $0.6180 into euros at the ask rate of $0.9328.
Thus the bid rate for the franc is 0.6180/0.9328 = ?0.6625.

Similarly, to acquire one franc, sell euros for dollars and then sell dollars for francs. Specifically, it costs $0.6195 to buy 1 franc. Because ?1 can be converted into $0.9302, it takes ?0.6195/0.9302 = ?0.6660 to buy $0.6190. Thus the ask rate for francs is ?0.6660.

The bid ask quote on the franc in Frankfurt is therefore ?0.6625-60.

Archived Solution
Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In
Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution
Get Custom Quote
Secure Payment