Question

Please show all calculations and be detailed with your answer. If using Excel, please show data.

practice #5

If you’re the treasurer of a Japanese firm needing to buy USD and a banker gives you a quote of 110.15 / 110.17 for USDJPY you would be able buy USD from the bank at what rate?

Answer 1

The 110.15/110.17 USD JPY quote given by the bank can be explained as-

110.15 is the bid rate, the rate at which the bank is ready to buy USD. Hence, the customer can sell at this rate.

110.17 is the ask rate, the rate at which the bank is ready to sell USD. Hence, the customer can buy at this rate.

In this way the bank earns its profit i.e. by buying at a lower rate and selling at a higher rate.

If you want to buy USD, from the bank, you will have to pay JPY 110.17/ USD. This is the rate at which the bank is ready to sell and the customer has to buy.

Please feel free to comment in case of any doubt.