Using the information contained in the table,what amount would an investor receive from exchanging 1EUR for AUD?

Question

Quizplus · Accepted Answer

Since we have EUR and we want AUD,the rate we need to use is of the form AUD/EUR.That is we will use the EUR as the denominator currency.Recalling the rule from the chapter,we need to inverse and then reverse the bid and ask EUR/AUD rates to get the AUD/EUR bid and ask rates.Using this procedure we thus obtain a bid rate of 1/0.5905 = 1.6934 and an ask rate of 1/0.5855 = 1.7079.As the trader gets the worst rate (i.e.traders lose from the spread,banks profit from the spread)then we will sell EUR at the low rate (i.e.bid rate)of 1.6934.Hence,the investor will receive AUD1.6934 in exchange for 1EUR.

Using the Information Contained in the Table,what Amount Would an Investor