You are an active currency trader in the dollar versus euro market. The current market quote ($/€) is 1.51-1.55. However, you believe the euro will appreciate versus the dollar. Which of the following quotes is the most likely one you will present to the market given your views?
A) 1.52-1.56
B) 1.50-1.54
C) 1.50-1.56
D) 1.52-1.54

Question

Quizplus · Accepted Answer

If you believe the euro will appreciate, you will most likely present a quote that increases the value of the euro relative to the dollar. Therefore, the bid-ask spread may shift upward from the current market quote of 1.51-1.55 to something like 1.52-1.56, indicating a higher bid and offer price for euros. Option A is the only quote that meets this criteria. Option B decreases the value of the euro, while option C widens the bid-ask spread too much. Option D does not change the value of the euro significantly enough.

You Are an Active Currency Trader in the Dollar Versus