CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

A bank/dealer with a shortage of a currency and a customer that needs the currency to pay an accounts payable might be tempted to ______

A. lower its bid price.
B. raise its bid price.
C. lower its ask price.
Correct Answer: B

Lowering its ask price means lowering the sales price which would lead to more sales and a larger shortage. Lowering the bid price means lowering the purchase price, which means buying less inventory.

User Contributed Comments 5

User Comment
vatsal92 This question needs to be answered from Bank's point of view.
ars2011 The Dealer buys at lower price sells at a higher price.Since now he needs currency he will offer better terms to the client i.e raise his bid to entice him
Inaganti6 supply chain deficit leads to increased willingness to procure fx at higher price for resale...
jejemike The dealer is at an advantage because he has a base currency that is in short supply but highly demanded for. The bid price, which is the price at which he will buy the price currency from the customer will rise
jzty This question should be answer from both perspectives. Both the bank and the customer are in need of the currency. So they need to pay more for what they want.
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