CFA Level I · CFA Level I Exam · Capital Flows and the FX Market
A dealer quotes the EUR/USD spot rate as 1.0790/1.0810 (bid/offer, USD per EUR). A client who wants to sell EUR 2,000,000 to the dealer will most likely receive USD closest to:
The client receives about USD 2,158,000. A client selling the base currency, euros, deals at the dealer's bid of 1.0790, so 2,000,000 times 1.0790 equals 2,158,000. The offer of 1.0810 applies only when the client buys euros.
- A2,158,000Correct
- B2,160,000
- C2,162,000
Explanation
The dealer buys the base currency (EUR) at the bid, 1.0790. USD received = 2,000,000 × 1.0790 = 2,158,000. Using the offer of 1.0810 gives 2,162,000, which is the rate the client would pay to buy euros. The midpoint gives 2,160,000.
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