Bank XYX quotes 1.2500 – 1.2550 for the AUD/USD exchange rate to a customer. Whatis the price at which the customer can buy one unit of the Australian dollar?(a) 1.2500.(b) 1.2550.(c) 0.8000.(d) 0.7968
Question
Bank XYX quotes 1.2500 – 1.2550 for the AUD/USD exchange rate to a customer. Whatis the price at which the customer can buy one unit of the Australian dollar?(a) 1.2500.(b) 1.2550.(c) 0.8000.(d) 0.7968
Solution
(b) 1.2550.
In currency exchange, the bank or currency exchange service will quote two prices: the bid price and the ask price. The bid price (1.2500 in this case) is the price at which the bank is willing to buy the currency, and the ask price (1.2550 in this case) is the price at which the bank is willing to sell the currency.
So, if a customer wants to buy one unit of the Australian dollar, they would have to pay the ask price, which is 1.2550 USD in this case.
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