- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Currency Exchange Rates: Understanding Equilibrium Value
- Subject 1. Foreign Exchange Spot Markets
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.
B. 0.0003.
C. 0.0004.
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 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 |