On the morning of October 30th 2017, Jeremiah P.travelled from Chicago to Brusse
ID: 2782071 • Letter: O
Question
On the morning of October 30th 2017, Jeremiah P.travelled from Chicago to Brussels. Jeremiah had 600 U.S. dollars in his wallet. Upon arriving in Brussels, he took a picture (as evidenced by the quality, he was using an Iphone2) of the forex display at the currency exchange window. IN As he walked through the airport, he rushed to the foreign exchange window and converted his USD600 into Euros How many Euros did he receive net of commissions? 1. a. b. What is the bid ask spread for the USD in Brussels (ignoring commissions)? C. What is the bid ask spread for the EUR in Brussels (ignoring commissions)? d. What is the bid ask spread for the all currencies listed (ignoring commissions)? Can you explain the reason for the difference in spreads?Explanation / Answer
a. Bid Ask spread of Euro USD is 1.373 and 0.988 i.e. if you buy euro you have to buy at 1.373 USD per Euro but when you sell Euro you will receive 0.988 Euro per USD. In present case he exchanged 600 USD to buy Euro i.e. 600 Euro / 1.373 USD per euro = 437 Euro pending commission, Commission is 1.25% with minumum of Euro 4.25, in present case it is 5.46 euro, thus he received - Euro 431.54 against his USD 600.
b Bid Ask Spread for USD in Brussels is 0.385 i.e. (1.373 - 0.988).
c. There is no bid ask spread for Euro in Brussels as Euro is the local currency in Brussels and all the other currency are exchanged with Euro or through Euro. For the sake of information it should be 0 Bid Ask Spread for Euro in Brussels being local currency.
d. Spread is nothing but the difference between ask price and bid price, the more the spread the less the demand or transactions in the pair are being conducted in the locality where rates are provided. As you can see below the bis as spread for GBP is the lowest and then USD this means they are conducting more transactions in these two currencies. Highese is in case of TND whereby it is 1.2574 as % it is 36%.
Currency Buy Sell Bid Ask Spread USD 1.373 0.988 0.385 GBP 1.028 0.779 0.249 CAD 1.722 1.272 0.45 TRY 5.338 3.558 1.78 MAD 13.266 8.843 4.423 TND 3.49 2.2326 1.2574 RUR 80.632 53.754 26.878 THB 46.464 30.976 15.488 AED 5.107 3.418 1.689 AUD 1.752 1.294 0.458Related Questions
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