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Homework answers / question archive / The Hong Kong dollar is quoted as HKD/US$=7
The Hong Kong dollar is quoted as HKD/US$=7.7438-7.7582 and the Colombian peso is quoted as COP/US$=3,481.0191-3,485.9599. What is the implicit quotation (bid and ask prices) of COP/HKD?
| HKD/Usd | = | 7.7438-7.7582 | -eq 1 | |
| COP/USD | = | 3,481.0191-3485.9599 | - eq 2 | |
| Divide eq. 2 by eq 1 | ||||
| COP/HKD | = | 3481.0191/7.7582 - 3485.9599/7.7582 | ||
| = | 448.6890 - 450.1614 | |||
| We have divided bid rate of COP/USD with Ask rate of HKD/USD and vice versa to ensure that there is bid-ask spread i.e. ask price is higher than bid price.If we had divided bid of COP/USD with bid HKD/USD and vice versa the bid price would have been higher thn ask price. |
