Question

A Korean bank (bank 1) buys $500.00 USD for 550,000 KW. One of the bank’s customers comes in and exchanges 300,000 KW for $260.86 USD. The total spread realized in this scenario is

0.00 USD.

11.86 USD.

5.00 USD.

7.89 USD.

Answer 1

Answer-

We have to equate both the Korean bank and the customers transaction in order to get the value of spread.

550000 KW = $ 500 USD
As per the above transaction we have to get the value of exchange for 300000 KW
550000 KW = $ 500 USD
1 KW = $ 500 USD / 550000 KW
300000 KW = ($ 500 USD / 550000 KW) x 300000 KW = $ 500 USD x (30 / 55) = $ 500 USD x 0,5454 = $ 272.70

But as per the question the Korean Bank the exchange was done with the customer for 300000 for $ 260.86

Therefore the total spread realized in this scenario is = $ 272.70 - $ 260.86 = $ 11.84 ~ $ 11.86

Hence the correct Option is the second option = $ 11.86