Bid-ask spread: Banco Herrero wants to make a bid-ask spread of 0.55 per cent on its foreign exchange transactions. If the ask rate on the Mexican peso (MP) is MP10.4192/$, what does the bid rate have to be?

Question

Quizplus · Accepted Answer

The bid-ask spread is calculated as a percentage of the ask rate. To find the bid rate, subtract 0.55% of the ask rate (MP10.4192/$) from the ask rate itself. This results in a bid rate of approximately MP10.3619/$.

Bid-Ask Spread: Banco Herrero Wants to Make a Bid-Ask Spread