Suppose a U.S. multinational company needs to buy Canadian dollar but the exchange rate between US dollar and Canadian dollar is not favorable for the company because of high bid-ask spread. However, the currency pair between Canadian dollar and Japanese Yen is favorable due to its low bid-ask spread. So, you want to find the cross-exchange rate between Canadian dollar and Japanese Yen. Assume the Canadian dollar is equal to $.76, and the Japanese Yen is equal to $.007. The value of the Canadian dollars is Japanese Yen. N 93.67 108.57 164.54 118.34

Suppose a U.S. multinational company needs to buy Canadian dollar but the exchange rate between US dollar and Canadian dollar is not favorable for the company because of high bid-ask spread. However, the currency pair between Canadian dollar and Japanese Yen is favorable due to its low bid-ask spread. So, you want to find the cross-exchange rate between Canadian dollar and Japanese Yen. Assume the Canadian dollar is equal to $.76, and the Japanese Yen is equal to $.007. The value of the Canadian dollars is Japanese Yen. N 93.67 108.57 164.54 118.34

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Suppose the Japanese yen exchange rate is ¥116/$ and the British pond exchange rate is $1.27/£. a) What is the yen to pound cross-rate? b) Suppose that a bank gives you a quote of ¥156/£. Is there an arbitrage opportunity here? If so, explain how to take advantage of the mispricing.
Given the interest rates in the U.S. and Canada are similar, if the Canadian dollar is expected to appreciate against the U.S. dollar, banks are most likely speculating on this anticipated exchange rate movement by borrowing ____ and investing in ____. A. dollars; Canadian dollar B. Canadian dollar; dollars C. Canadian dollar; Canadian dollar D. dollars; dollars
Suppose a U.S. firm purchases some Chinese handicrafts. The china costs 1,000 Chinese yuan. At the exchange rate of $1.00 = 6.2 yuan, the dollar price of the goods is:
Bank of America is willing to buy or sell Canadian dollar for $.99. The bank is willing to buy or sell Nepalese rupee at an exchange rate of 97 rupee per dollar. The bank is willing to purchase Canadian dollar at an exchange rate of 1 rupee = .0104 Canadian dollars. Show how you can make a profit from triangular arbitrage. What would be your profit or loss if you had $16,000? What %?
Suppose the Japanese yen exchange rate is ¥122 = $1 and the British pound exchange rate is £1 = $1.53. Suppose the cross-rate is ¥140 = £1. If there is, what would be the profit of the mispricing?
If the real exchange rates between the USD and CAD, AUD, and BRL respectively are 1.20, 0.90, and 1.40 respectively with the percentage of trade between the US and Canada, US and Australia, and US and Brazil are 50%, 20%, and 30% respectively (assuming these are only countries on the planet!), what is the effective real exchange rate for the USD? Question options: a)0.9 b)1.4 c)1.2 d)1.0
Answer the following questions related to the foreign exchange rate and market. (1) The current exchange rate between the U.S. dollar and the Australian dollar is U.S. $1 = AUD$1.31. If the U.S. dollar is expected to appreciate by 5% relative to the Australian dollar, what is the new expected exchange rate? (2) The Argentinean peso trades at 0.06 peso per U.S. dollar. How many Argentinean pesos would you tip a taxi driver if you give her a $9 bill? (3) During the 1997 Asian financial crisis, the Thai baht was trading at $0.02475 per Thai baht. The Thai baht is trading at $0.03093 per Thai baht now. What is the percentage change in the Thai baht's value? Would you consider it an appreciation or depreciation? (4) Suppose that the U.S. Federal Reserve decides to raise interest rates to combat inflation. How will this decision affect the exchange rate between the U.S. dollar and the euro? Discuss with references or a practical example.
(a) Suppose you are a Bangladesh Citizen who is planning to go to USA. Current Exchange Rate is Tk BDT/$ 85/86 and according to your estimation you need 3.5lacs taka for your trip. i. How much BDT do you need to cover your cost of trip? ii. What is the American Quote in this case? (b) The following exchange rates are given AUD/USD 1.1197/1.2135 & AUD/GBP 2.1920/2.2500. What is the European quote for Pounds?
Suppose the exchange rate for Japanese yen, S0, is currently Yen160 = $1. If the interest rate in the United States is RUS = 10% and the interest rate in Japan is Rj = 7%, then what must the forward rate be to prevent covered interest arbitrate?
Suppose you have developed a hairbrained scheme to purchase art, mint a NFT, and then sell it for a bubbly profit. For your scheme, you need to import USD 99570.85 worth of art into Australia. You are concerned that the exchange rate might move adversely during this time. Suppose the current exchange rate is 0.704 You see the following instruments available: • A Put option on AUD with a strike price (in USD/AUD) of 0.6 with a 1.3% premium • A Call option on AUD with a strike price (in USD/AUD) of 0.88 with a 1.7% premium • A forward rate agreement with a FRA rate of 3.5% • A customized forward forward arrangement of 4% Suppose you decide to hedge with the most relevant instrument. Assume that the USD/AUD exchange rate becomes 0.45. What is the overall cost of the art purchase in AUD, including any fees? O a. 163794.04825 O b. 113148.69318 O c. 165951.41667 O d. None of these options O e. 111225.16540 O f. Not enough information O g. 164656.99562
You observe the following current rates and prices today: the spot exchange rate today: AU$2.05 per U.K pound; the price level in Australia today: AU$4.00; and the price level in the U.K. today: 2.00 pounds (a) Calculate the real exchange rate of Australia against the U.K., q(AU/UK). (b) Calculate the over-/under-valuation of the Australian dollar.
Consider the situation of firm A and firm B. The current exchange rate is $2.00/£ Firm A is a U.S. MNC and wants to borrow £30 million for 2 years. Firm B is a British MNC and wants to borrow $60 million for 2 years. Their borrowing opportunities are as shown, both firms have AAA credit ratings. $ £ A $ 6 % £ 5 % B $ 7 % £ 4 % Explain how firm B could use the forward exchange markets to redenominate a 2-year £30m 4 percent pound sterling loan into a 2-year USD-denominated loan.

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