CFA Level I · CFA Level I Exam · Exchange Rate Calculations
A dealer quotes USD/CAD at 1.3640/1.3646 (CAD per 1 USD). The bid-ask spread expressed in pips (one pip = 0.0001) is:
The spread is 6 pips. The ask of 1.3646 minus the bid of 1.3640 equals 0.0006 CAD per USD, and since a pip is 0.0001, that is six pips. Halving or doubling the difference would give the incorrect options.
- A3 pips
- B6 pipsCorrect
- C12 pips
Explanation
Spread = 1.3646 - 1.3640 = 0.0006. With one pip equal to 0.0001, this is 6 pips. The 3-pip option uses the half-spread, and 12 pips doubles it.
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