Question
Assume you observe the following quotes given by a Bank Dealer: Bid Ask Spot ($/CAD): 0.8653 0.8667 Spto ($/Euro): 1.4000 1.4200 where CAD is Canadian
Assume you observe the following quotes given by a Bank Dealer:
Bid Ask
Spot ($/CAD): 0.8653 0.8667
Spto ($/Euro): 1.4000 1.4200
where CAD is Canadian Dollars. What are the No-arbitrage Bid and Ask prices the currency dealer should be quoting for Spot(Euro/CAD). In other words, in the case of the No-arbitrage (equilibrium)Bid(Euro/CAD), find the price that the currency dealler will pay in Euros to buy CAD back from the customer, and in the case of the No-arbitrage (equilibrium) Ask(Euro/CAD), find the price that a currency dealer will take in Euros to sell CAD to the customer.
| a. | Bid=0.6191, Ask=0.6094 (/CAD). | |
| b. | Bid=0.6031 , Ask=0.6094 (/CAD). | |
| c. | Bid=0.6075, Ask=0.6091 (/CAD). | |
| d. | Bid=0.6094 , Ask=0.6191 (/CAD). |
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