Bid and offer rates
A bid is the dealer's buying side and an offer or ask is its selling side; the precise transaction and quoted units determine what the dealer buys or sells. In a conventional two-way money-market deposit quote, the bank bid is the rate it pays to take deposits and its offer is the rate it charges to lend, subject to the market's quote convention. In foreign exchange, identify the base currency and quote direction before selecting a side. The spread is the difference between the two quotes, not a synonym for either individual rate.
Worked example
A bank quotes a deposit market at 4% bid and 5% offer. Under that convention it pays 4% to take a deposit and charges 5% to lend. A customer choosing a transaction must use the appropriate side, maturity and actual contract terms.
Common mistake
Reversing a bank's deposit bid and lending offer, or calling either quoted rate itself the bid-offer spread.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Supporting | September 2026–June 2027 |
| ACCA | FM | Supporting | September 2026–June 2027 |