Linda wants to sell U.S. dollars and buy Noan currencies, currency of the country of Noansia. The spot exchange rate is 1,170 Noan to the dollar; hence, Linda is unlikely to sell her U.S. dollars at this rate. The bank offers Linda 1,150 Noan for each dollar she sells. However, if Linda plans to sell Noan currencies to buy U.S. dollars, the bank will charge her 1,190 Noan for each dollar she purchases. In this scenario, the 20 Noan difference between the spot exchange rate and the rate that the bank offers Linda is referred to as the _____.

Question

Quizplus · Accepted Answer

The difference between the buying and selling rates offered by the bank is known as the spread. This is the bank's profit margin on the currency exchange.

Linda Wants to Sell U