My name is Steve Chen, a fellow member of ACCA and course director at APC (www.globalapc.com) teaching ACCA online courses to students from all around the world. This article will explain the topic ‘Quoted Foreign Exchange Rates’ in ACCA Advanced Financial Management (AFM) exam.
The quoted foreign exchange rates topic is divided into two articles, and this is article two.
Banks often quote foreign exchange rates into bid and offer prices, and let me give you an example:
Banks usually quote foreign exchange rate with a spread, ie difference between bid and offer price to make a profit.
Bid price is the price that banks buy from the entity. Offer price is the price that banks sell to the entity. Bid price is lower than the offer price, ie bank buys low and sells high.
However, we often interpret the above quotation standing from our (entity’s) perspective. Focusing on the base currency (USD), if we need (buy) USD, we choose a higher price (offer price). If we sell USD and get CHF, we choose a lower price (bid price).
Again, the key to this is to focus on the base currency, which is USD, and if:
Business wants to buy USD, select the offer price.
Business wants to sell USD, select the bid price.
I teach ACCA Financial Management and Advanced Financial Management papers for quite a few years, and one of my ACCA students Martin Valent who studied ACCA AFM with me (join my online course at www.globalapc.com) became the first prize winner in March 2017 ACCA P4 Advanced Financial Management exam in Slovakia. I am passionate about teaching ACCA AFM paper as this paper is quite practical. Students often found things learned in other papers, such as financial and management knowledge, linked with strategic papers such as ACCA SBL.
In addition to providing ACCA lectures online, I also wrote articles in ACCA AB magazine. Besides, I am the author of four accounting books. If you are interested in studying ACCA courses with me, please visit my website http://www.globalapc.com for further information, where you can find many of my ACCA demo video lectures.