Question

Using the spot and outright forward quotes in the table below, determine the corresponding bid-ask spreads in points. Spot 1.3487 − 1.3500 One-Month 1.3496 − 1.3514 Three-Month 1.3512 − 1.3535 Six-Month 1.3552 − 1.3580

	Bid-ask Spreads in Points
Spot
One-Month
Three-Month
Six-Month

Answer 1

Spot rate:

Given, Spot rate = 1.3487/1.3500

Spot Bid -Ask spread

= 1.3500 - 1.3487 = 13 points

One Month Forward rate:

One month forward rate = 1.3496/1.3514

One month Bid - Ask spread

= 1.3514 - 1.3496 = 18 points

Three Month Forward rate:

Three months forward rate = 1.3512/1.3535

Three month Bid - Ask spread

= 1.3535 - 1.3512 = 23 points

Six Month Forward rate:

Six months forward rate = 1.3552/1.3580

Six month Bid - Ask spread

=1.3580 - 1.3552 = 28 points

Summary:

Particulars	Bid - Ask spread in points
Spot	13
One - Month	18
Three - Month	23
Six - Month	28