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Mississippi Mud Pies Inc., needs to buy 1,000,000 Swiss francs (CHF) to pay its Swiss chocolate supplier. Its banker quotes bid-ask rates of CHF1.3980-1.3995/USD. What will be the dollar cost of the CHF 1,000,000?

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Karabo99

Answer:

The dollar cost of the CHF 1,000,000 is 715,307.58 USD

Explanation:

Bid-ask is quoted with USD in the denominator, which means we can buy USD at ask price or sell USD at bid price.

We need to buy CHF (i.e., sell USD). Let's sell USD to get 1,000,000 CHF at the bid price.

CHF 1.3980 /USD  

1,000,000 CHF/ 1.3980 (CHF/USD) = 715,307.582260372 USD

to buy 1,000,000 CHF we need to pay 715,307.582260372 USD.

Therefore, The dollar cost of the CHF 1,000,000 is 715,307.58 USD

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