The Hong Kong dollar is quoted as HKD/US$=7

Finance Dec 23, 2020

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?

Expert Solution

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.

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