If the direct price of the dollar is DKK5 in Copenhagen and transaction costs are .5%,then the minimum-maximum direct quotes for the Danish krone in New York are

Question

Quizplus · Accepted Answer

The direct quote for the Danish krone in New York is the reciprocal of the direct price of the dollar in Copenhagen. With a direct price of DKK5, the reciprocal is 1/5 = 0.2000. Considering the transaction costs of 0.5%, the range is 0.2000 ± 0.0010, resulting in a minimum-maximum range of 0.1990-0.2010.

If the Direct Price of the Dollar Is DKK5 in Copenhagen