Suppose the spot and forward bid-ask rates for the South African rand/Ghana cedi (ZAR/GHS) exchange rate at a particular
Posted: Sun May 29, 2022 6:12 pm
Suppose the spot and forward bid-ask rates for the South African
rand/Ghana cedi (ZAR/GHS) exchange rate at a particular today are
as follows: Period ZAR/GHS Bid Rate ZAR/GHS Ask Rate Spot 3.0815
3.1817 1-month 3.0813 3.1818 6-months 3.0624 3.1630 12-months
3.0396 3.1404 i. Given the above information, determine the %
bid-ask spread for all the maturities. (4 marks)
ii. Briefly discuss the determinants of bid-ask spreads in
foreign exchange markets, and explain why you would normally expect
the percentage bid–ask spread on the forward rates to increase with
the maturity of the forward contract.
rand/Ghana cedi (ZAR/GHS) exchange rate at a particular today are
as follows: Period ZAR/GHS Bid Rate ZAR/GHS Ask Rate Spot 3.0815
3.1817 1-month 3.0813 3.1818 6-months 3.0624 3.1630 12-months
3.0396 3.1404 i. Given the above information, determine the %
bid-ask spread for all the maturities. (4 marks)
ii. Briefly discuss the determinants of bid-ask spreads in
foreign exchange markets, and explain why you would normally expect
the percentage bid–ask spread on the forward rates to increase with
the maturity of the forward contract.