Question

On your first day at work, your boss tells you to call the bank and get the bid and the ask for British pounds. Having just returned from studying in London, you know that the exchange rate should be somewhere around 1.25. You call the number and the lady says "579 and 585." What does that mean?

	A.	The bid is 0.579 and the ask is 0.585.
	B.	She didn't understand your question.
	C.	The bid is 1.2579 and the ask is 1.2585.
	D.	The ask is 0.579 and the bid is 0.585

Answer 1

The answer to the question stated above will be option (C) i., "The bid is 1.2579 and the ask is 1.2585."

The quotes in the forex market is stated in terms of BID/ASK. The difference between the Bid and Ask is known as the Bid-Ask Spread. Also, the ask is always greater than the Bid rate. Hence, option (D) is out of context and so is option (B). Out of the remaining 2 ptions, A and C, the option (A) is incorrect because then there will be no use of the rate stated above. Hence, the correct answer is option (C).

Therefore, the correct answer is option (C) i.e., "The bid is 1.2579 and the ask is 1.2585."