If the direct price of the dollar is 2.5 in Frankfurt and transaction costs are .4% of the amount transacted, then the minimum? maximum direct quotes for the DM in New York are:

Question

Quizplus · Accepted Answer

The correct answer is A because the minimum direct quote for the DM in New York is 2.5 * (1 - 0.004) = 2.49, and the maximum direct quote for the DM in New York is 2.5 * (1 + 0.004) = 2.51.

If the Direct Price of the Dollar Is 2