Given the following information, explains the DM/S$ currency against currency bid-ask quotations?
Bank Quotations American Terms European Terms
Bid Ask Bid Ask
Deutsche Marks . 6784 .6789 1.4730 1.4741
Singapore Dollar .6999 .7002 1.4282 1.4288
Equation from the text implies S(DM/S$b) = S($/S$b) x S(DM/$b) = .6999 x 1.4730 = 1.0310. The reciprocal, 1/S(DM/S$b) = S(S$/DMa) = .9699. Analogously, this is implied that S(DM/S$a) = S($/S$a) x S(DM/$a) = .7002 x 1.4741 = 1.0322. The reciprocal, 1/S(DM/S$a) = S(S$/DMb) = .9688. Therefore, the DM/S$ bid-ask spread is DM1.0310-DM1.0322 & the S$/DM spread is S$0.9688-S$0.9699.