Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid/ask percentage spread is:

Question

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid/ask percentage spread is:​

Quizplus · Accepted Answer

To calculate the bid/ask percentage spread, we use the formula:
(Bid rate - Ask rate) / Ask rate x 100%
Plugging in the numbers, we get:
($0.45 - $0.47) / $0.47 x 100% = -0.02 / $0.47 x 100% = -4.26%
Note that we have a negative spread, meaning the bank is selling the Swiss francs at a higher rate than it is buying them, which is a common occurrence in foreign exchange transactions. However, we take the absolute value of the spread to get the percentage. Therefore, the bid/ask percentage spread is about 4.26%.

Assume That a Bank's Bid Rate on Swiss Francs Is