Question: A narrow bid - ask spread indicates high efficiency and hence, high liquidity in the spot exchange market. Other things equal, if the interest differentials

A narrow bid

-

ask spread indicates high efficiency and hence, high liquidity in the spot exchange market.

Other things equal, if the interest differentials between two countries are larger, then it is more likely to make a higher profit on the currency carry trade.

A narrow bid-ask spread indicates high efficiency and hence, high liquidity

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