1. What does the “bid price” represent in Forex trading?
A) The price at which you can buy a currency pair
B) The price at which you can sell a currency pair
C) The average price over a specific period
D) The price of a currency in another currency
Answer: B) The price at which you can sell a currency pair
2. The “ask price” is best described as:
A) The price at which you can buy a currency pair
B) The price at which you can sell a currency pair
C) The difference between two currencies
D) The market’s closing price
Answer: A) The price at which you can buy a currency pair
3. The difference between the bid price and the ask price is known as the:
A) Spread
B) Margin
C) Leverage
D) Commission
Answer: A) Spread
4. If the bid price of USD/JPY is 110.50 and the ask price is 110.55, what is the spread?
A) 0.05
B) 0.10
C) 0.15
D) 0.20
Answer: A) 0.05
5. When a trader wants to buy a currency pair, they will transact at the:
A) Bid price
B) Ask price
C) Midpoint price
D) Last traded price
Answer: B) Ask price
6. To sell a currency pair, a trader will execute the trade at the:
A) Ask price
B) Bid price
C) Market price
D) Opening price
Answer: B) Bid price
7. A wider bid-ask spread generally indicates:
A) Higher market liquidity
B) Lower market liquidity
C) More stable prices
D) Increased trading volume
Answer: B) Lower market liquidity
8. In Forex, which of the following factors can affect bid and ask prices?
A) Economic news releases
B) Market demand and supply
C) Time of day
D) All of the above
Answer: D) All of the above
9. A trader wishes to enter a long position. At what price will they enter the trade?
A) The bid price
B) The ask price
C) The previous closing price
D) The opening price
Answer: B) The ask price
10. If the bid price for EUR/USD is 1.1200 and the ask price is 1.1202, what is the bid-ask spread?
A) 0.0002
B) 0.0004
C) 0.0001
D) 0.0010
Answer: B) 0.0002