Topic 4: Spot FX (2)

Question 1

What is BID?

Answer 1

It refers to the bank buying the Reference currency & customer is selling the reference currency.

Question 2

What is ASK?

Answer 2

It refers to the bank selling the reference currency & customer is buying the reference currency

Question 3

What is cross rate calculations?

Answer 3

A cross rate is the indirect pricing of one currency in terms of another currency. The cross rate of any two currencies can be calculated from their respective mid- rate (the middle of bid and ask price) against USD.

Question 4

What do you do when you have 2 European quotes? (Single)

Answer 4

Divide

Question 5

What do you do when you have 2 American quotes? (Single)

Answer 5

Multiply

Question 6

What do you do when you have 2 European quotes? (Double)

Answer 6

Cross Divide

(rmb, the new reference currency is the denominator)

Question 7

What do you do when you have 2 American quotes? (Double)

Answer 7

Direct Multiply

Question 8

What is a European quote?

Answer 8

It is when the USD is the Base/Reference currency.

eg. USD/SGD

Question 9

What is an American quote?

Answer 9

It is when the USD is term currency

Question 10

How do you calculate Total Rate of Return?

Answer 10

Profit/Loss / Cost of Purchase