Question

Explain the following terms: Ask rate and Bid rate, LIBOR, LIFFE, An underlying asset, Dry-ended operation, Indirect quotation, Price Interest Point, Spot price, Long position, Arbitrage

Answer 1

1. Ask Rate: It is the rate at which investor is willing to sell the security for. Eg: If an investor wants to buy a stock, they need to determine how much someone is willing to sell it for. They look at the ask price, the lowest price someone is willing to sell the stock for. Bid Rate: It is the price that an investor is willing to pay for the security. Eg: if an investor wanted to sell a stock, he or she would need to determine how much someone is willing to pay for it. This can be done by looking at the bid price. It represents the highest price that someone is willing to pay for the stock.