A New Zealand company needs to make a payment of 600,000 Thai Baht (THB). To do this it needs to convert New Zealand dollars (NZD) to THB and it has received the following exchange rate quotes from a dealer: Exchange rate Bid Ask THB/USD 34.52 35.01 NZD/USD 1.5940 1.6025 What is the amount that the company will need to pay in NZD to purchase the required THB? and what is the percentage bid-ask spread for the two-sided THB/USD?
A New Zealand company needs to make a payment of 600,000 Thai Baht (THB). To do this it needs to convert New Zealand dollars (NZD) to THB and it has received the following exchange rate quotes from a dealer: Exchange rate Bid Ask THB/USD 34.52 35.01 NZD/USD 1.5940 1.6025 What is the amount that the company will need to pay in NZD to purchase the required THB? and what is the percentage bid-ask spread for the two-sided THB/USD?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
A New Zealand company needs to make a payment of 600,000 Thai Baht (THB). To do this it needs to convert New Zealand dollars (NZD) to THB and it has received the following exchange rate quotes from a dealer:
| Exchange rate | Bid | Ask |
| THB/USD | 34.52 | 35.01 |
| NZD/USD | 1.5940 | 1.6025 |
What is the amount that the company will need to pay in NZD to purchase the required THB?
and what is the percentage bid-ask spread for the two-sided THB/USD?
Expert Solution
Step 1
Bid price refers to the price at which the forex trader buys the foreign currency while Ask price refers to the price at which the forex trader sells the foreign currency. The Bid price is always smaller than the Ask price and the difference between these two prices is referred to as the Bid-Ask spread.
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