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Basic Question 19 of 19

The JPY/USD bid-ask rate observed in Tokyo is 80.4750 - 80.4883. An analyst just came up with an implied JPY/USD bid-ask rate based on EUR/USD and JPY/EUR rates. Which of the following implied bid-ask rate would seem to be wrong?

A. 80.4550 - 80.4795.
B. 80.4800 - 80.4900.
C. 80.4742 - 80.4748.
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User Contributed Comments 1

User Comment
skarthi146 Well, this rate may be possible for a moment and then arbitrageurs jump in and then disappears. I think the question should be asking us which price will allow arbitrage.
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz

Tamara Schultz

Learning Outcome Statements

calculate and interpret the bid-ask spread on a spot or forward foreign currency quotation and describe the factors that affect the bid-offer spread;

identify a triangular arbitrage opportunity and calculate its profit, given the bid-offer quotations for three currencies;

CFA® 2025 Level II Curriculum, Volume 1, Module 8.