CFA Practice Question

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CFA Practice Question

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.

A. 0.0002.
B. 0.0003.
C. 0.0004.
Correct Answer: A

The dealer will buy a EUR from the client at 1.3229 and sell it in the interbank market at 1.3231, making a profit of 0.0002 for every EUR transacted.

User Contributed Comments 2

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.
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