Suppose your bank quotes you an ask price of USD 2.50 / GBP anda bid...

Suppose your bank quotes you an ask price of USD 2.50 / GBP and a bid price of USD 2.00 / GBP. If you buy USD 5,000 worth of GBP and immediately sell them back, how many USD do you have left after both transactions?

Expert Solution

Convert USD into GBP:

GBP Bought = 5000 / 2.5

= 2000 GBP

To purchase GBP, Ask rate is releveant ( 2.50)

GBP SOld = 2000 * 2

=USD 4000

To sell GBP, Bid Rate is relevant ( 2.00)

Amount left in USD after 2 Treansactions is $ 4000

jeff jeffy answered 2 years ago

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