For a Bank to Make a Profit from Foreign Exchange

question 15

Multiple Choice

For a bank to make a profit from foreign exchange forward agreements, the difference between the asked price and the bid price must be

• A)zero.
• B)positive.
• C)negative.
• D)less than the rate of interest.

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Definitions:

Units

The basic measure of a product or commodity used in the manufacturing and inventory process.

Variable Manufacturing Cost

Costs in manufacturing that vary with the level of output, including costs such as raw materials and direct labor.

Unit Product Cost

The total cost (direct materials, direct labor, and manufacturing overhead) associated with producing one unit of a product.

Reduced Price

The selling price of a product or service after it has been discounted from the original or standard price.