Question

Currency	Bid Rate	Ask Rate	Spread	% of Spread
US$	5.20	C	D	0.0545
£	E	6.70	F	0.0448
€	5.90	6.30	G	H
ZAR	0.38	I	J	0.0952
CFA	0.11	0.15	K	L

The table above shows the interbank exchange rate of the GHC against its major traders.

a. Complete the above table.

b. Serwa Akoto, the CEO of SAA Limited, a Ghanaian manufacturing firm, wants to import manufacturing equipment worth US$1 million from the United States of America. How much Ghanaian cedis should she gather for the purchase of the equipment? How much profit will the bank make on this transaction?

c. Given the bid rate, what is Great Britain pound (£) value of the US$?

d. Given the bid rate, what is the ZAR (R) value of a CFA?

Answer 1

For US dollar

0.0545% = (C - 5.2)/C

C = 5.2028 (ask)

D = ask - bid = 5.2028 - 5.2 = 0.0028

Pound

0.0448% = (6.7 - E)/E

E = 6.6969

F = 6.7 - 6.6969 = 0.0031

Euro:

G = 6.30 - 5.90 = 0.4

H = 0.4/6.3 = 6.3492%

ZAR

0.0952% = (I - 0.38)/I

I = 0.3804

J = 0.3804 - 0.38 = 0.0004

CFA

K = 0.15 - 0.11 = 0.04

L = 0.04/.15 = 26.67%

(B) To buy dollar from GHC, she has to pay ask price

ask price = 5.2028 GHC/$

No. of GHC required = $1m * 5.2028 GHC/$ = GHC 5.2028m

Amount of profit made by bank = 0.0545% * $1m = $545

(c) Bid rate: Great Britain pound (£) value of the US$

Say you have $1

Buy GHC at bid rate

GHC received = $1 * 5.2 = GHC 5.2

From these GHC buy pounds, using ask price

Pound = GHC 5.2 * 1/(6.7 GHC/pound) = 0.7761 pound

dollar pound exchange rate = 0.7761 pound/dollar