Question

You get a bid-ask quote on the EUR of 1.22-1.23 USD/EUR. How many EUR will you be able to buy with 100 USD?

Answer 1

The answer is 81.3008 euros.

Let us understand how we get to this answer.

The first question is what are we going to use, Bid quote or Ask quote?

Bid Price - The bid price represents the maximum price that a buyer is willing to pay for a security.

Ask Price - The ask price represents the minimum price that a seller is willing to receive.

So, if we are going to buy, then we are going to buy at the ASK price.

Ask price is 1.23 USD/EUR, which can be read as for 1 euro we are going to pay 1.23 dollars.

So, if 1 euro = 1.23 dollar. Then, 1 dollar = 1/1.23 euro = .813008

Therefore, 100 dollars = .813008 X 100 euros = 81.3008 euros.

Hope this helps :)