Question

XYZ pies, Inc. needs to purchase 1,000,000 Swiss francs (CHF) to pay its chocolate supplier. Its dealer quotes bid–ask rates of CHF1.3990–1.4000/USD. What will be the dollar cost of the CHF1,000,000?provide step-by-step instructions for solving the problem

		1400000
		714796
		1399000
		714285

Answer 1

Bid rate = CHF 1.3990, it is the price at which bank is willing to buy $1

Ask rate = CHF 1.4000, it is the price at which bank is willing to sell $1

XYZ pies, Inc. needs to sell dollars in order to buy Swiss Franc. bank is buying dollars so the relevant rate is the Bid rate which is CHF 1.3990 / USD

Swiss Franc required = 1,000,000

Exchange rate = CHF 1.3990 / $

Dollar cost of CHF 1,000,000 = CHF 1,000,000 / CHF 1.3990 / $

= $714,796

So, The Dollar cost of CHF 1,000,000 = $714,796

Option '2' is correct