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HKSI PrepStudyingPaper 1
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Bank Q quotes EUR/USD 1.0850/1.0853. Which of the following statements are correct? I. Bank Q buys euros at 1.0850. II. The bid-offer spread is 3 pips. III. A client buying euros pays 1.0850. IV. One pip in this quote is 0.01.
The quoting bank buys the base currency (euros) at the bid, 1.0850, and sells it at the offer, 1.0853, so statement I is correct. For EUR/USD a pip is the fourth decimal place, 0.0001, so the spread of 1.0853 - 1.0850 = 0.0003 is 3 pips (statement II). Statement III is wrong: a client buying euros deals at the bank's offer, 1.0853. Statement IV is wrong: 0.01 would be 100 pips in this pair; the pip of 0.01 applies to pairs quoted to two decimals, such as USD/JPY. Source: Standard FX quotation conventions (bid/offer, spread, pip) (as at October 2026).
Taking the client's side of the quote. The bid and offer are the bank's buying and selling prices for the base currency.
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