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Assume that the dealer quote for the Canadian dollar (CAD) American dollar (USD) currency...

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Accounting

Assume that the dealer quote for the Canadian dollar (CAD) American dollar (USD) currency pair in the current spot market is USD/CAD 1.3436 1.3441 (Bid Ask).

  1. If a dealer is willing to offer a new spot Bid Ask quote at 35 40, what is implied about the dealers expectation of the USD/CAD exchange rate?

  1. What is the Bid Ask spread, in % terms, for the dealer at the current spot price and the new spot price.

Bid Ask Spread for current spot price:

Bid Ask Spread for the new spot price:

  1. Justify the difference or the lack thereof in the Bid Ask spread between the current and the new spot rates.

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