QUESTION 11 a) Hiro has $10,000 to invest in the foreign-exchange market, with a focus on U.S. dollars (USD), euros (EUR), and Japanese yen (JPY). Calculate the potential arbitrage profit or loss Hiro could realize from the following sequence: USD to EUR, EUR to JPY, and JPY back to USD. b) Assess Hiro's arbitrage profit or loss from converting USD to JPY, then JPY to EUR, and finally EUR back to USD. c) Examine the current exchange rates between the USD, EUR, and JPY to determine if there are any arbitrage opportunities available with these currencies. Exchange rate USD EUR JPY USD 1.00000 0.78230 81.200 EUR 1.27830 1.00000 103.796 JPY 0.01232 0.00963 1.000

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.