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Basic Question 1 of 19
The quote in the interbank USD/EUR spot market is 1.3231/1.3235. A dealer quotes a client a bid-offer of 1.3229/1.3238 for a spot USD/EUR transaction. Suppose a client hits the dealer's bid, the dealer should make a profit of ______ for every EUR transacted.
B. 0.0003.
C. 0.0004.
A. 0.0002.
B. 0.0003.
C. 0.0004.
User Contributed Comments 3
| User | Comment |
|---|---|
| jejemike | If the client hits the dealer's bid, it means the dealer will buy 1 euro at 1.3229 from the client (dealer gives 1.3229 USD to the client and takes 1 euro). The dealer will sell the 1 euro bought in the inter bank market at 1.3231 dollars, effectively earning a gain of 0.0002 per euro |
| Jagaahuu | yep, u r right. |
| yunkai03 | Why not sell at 1.3235, which is already the sell rate quoted in interbank |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain spot and forward rates and calculate the forward premium/discount for a given currency;
calculate the mark-to-market value of a forward contract;
CFA® 2025 Level II Curriculum, Volume 1, Module 8.