The bid/ask spread on an exchange rate can be used to directly determine:

Question

The bid/ask spread on an exchange rate can be used to directly determine:​

Quizplus · Accepted Answer

The bid/ask spread reflects the transaction cost of foreign exchange, which is the cost incurred when buying or selling a currency. The spread represents the difference between the buying and selling price offered by market participants. The larger the spread, the higher the transaction cost. Therefore, the bid/ask spread is directly related to the transaction cost of foreign exchange. The spread does not provide information about how an exchange rate will change, the forward premium, or the currency option premium.

The Bid/ask Spread on an Exchange Rate Can Be Used