CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

Regarding the size of the bid-ask spread quoted to dealers' clients, which statement is FALSE?
A. It depends largely on the bid-ask spread in the interbank market for the pair.
B. Large transactions typically get narrower spread than small transactions. This is due to the higher average costs dealers incur on small transactions.
C. A dealer may want to quote a tight bid-ask spread just to make her clients happy.
Explanation: The opposite is true. The larger the transaction, the more difficult for the dealer to offset his position the interbank market.

C is true. By doing so the dealer will likely win her clients' other businesses.

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