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CFA Level I · CFA Level I Exam · Exchange Rate Calculations

A dealer quotes USD/CHF at 0.9100/0.9106. The bid-ask spread expressed in pips and as a percentage of the bid are most likely closest to:

The spread is 6 pips, or about 0.066% of the bid. The ask minus the bid is 0.0006, and a pip is 0.0001. Dividing 0.0006 by the bid of 0.9100 gives roughly 0.066 percent.

  1. A6 pips and 0.066%Correct
  2. B6 pips and 0.659%
  3. C60 pips and 0.066%

Explanation

Spread = 0.9106 − 0.9100 = 0.0006, which is 6 pips (1 pip = 0.0001). As a percentage of the bid: 0.0006/0.9100 = 0.0659%, i.e. 0.066%. The 0.659% option misplaces the decimal; 60 pips miscounts the pip size.

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