Question

In June 1994 the central bid-ask rates for the French franc and the Dollar on one hand, and the German Mark and Dollar on the other were:

FF/ $ = 6.9032– 299,

M/ $ = 2.010 – 49.

Obtain the FF/M bid-ask cross rates, and precisely interpret them.

Answer 1

Given that

FF/ $ = 6.9032– 6.9299

M/ $ = 2.010 – 2.049

Calculation of FF/M bid-ask cross rates

FF/M (bid) = FF/$(bid)/M(ask) = 6.9032/2.049 =3.369058 or rounded off to 3.3691

FF/M (ask) = FF/$ (ask)/M (bid) = 6.9299/2.010 = 3.447711 or rounded off to 3.4477

Expalanation

1 German mark buying rate = FF 3.4477

1 German mark selling rate = FF 3.3691

Buying rate is bid rate and selling rate is the ask rate .it means we can buy 1 german mark from FF 3.4477.and we can sell 1 german mark at FF 3.3691 in foreign exchage market..

Customer will always be buying at ask rate from the foreign exchage dealer, and will always be sell at bid rate to foreign exchage dealer

answered by: anonymous