1. Bid/ask Spread. Utah Bank’s bid price for Canadian dollars is $.7938 and its

Question

1. Bid/ask Spread. Utah Bank’s bid price for Canadian dollars is $.7938 and its ask price is $.81. What is the bid/ask percentage spread (4 points)?

2. Cross Exchange Rate. Assume Poland’s currency (the zloty) is worth $.17 and the Japanese yen is worth $.008. What is the cross rate of the zloty with respect to yen? That is, how many yen equal a zloty (4 points)?

3. Interpreting Exchange Rate Quotations. Today you notice the following exchange rate quotations: *$1 is equal to 3.00 Argentine pesos *1 Argentine peso = 0.50 Canadian dollars * You need to purchase 100,000 Canadian dollars with U.S. dollars. How many U.S. dollars will you need for your purchase ?

Explanation / Answer

We have following formula for bid ask spread%:

Bid ask spread% = ( Ask Price – Bid Price) / Ask price

                                = (0.81-0.7938)/ 0.81

                                   = 2%

Therefore, Bid ask spread is 2%.

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