Suppose the Japanese yen exchange rate is ¥116 = $1 and the British pound exchange rate is £1 = $1.27. a. What is the cross-rate in terms of yen per pound? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Suppose the cross-rate is ¥156 = £1. What is the arbitrage profit per dollar? Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616. a. Cross-rate b. Arbitrage profit per dollar ¥ $ 147.32 /£ 0.0600

Suppose the Japanese yen exchange rate is ¥116 = $1 and the British pound exchange rate is £1 = $1.27. a. What is the cross-rate in terms of yen per pound? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Suppose the cross-rate is ¥156 = £1. What is the arbitrage profit per dollar? Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616. a. Cross-rate b. Arbitrage profit per dollar ¥ $ 147.32 /£ 0.0600

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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Suppose the Singapore dollar is worth A$1.03 and the Malaysian ringgit is worth A$0.33.(a) Define a cross exchange rate in general terms, and calculate the cross exchange rate between theSingapore dollar and the Malaysian ringgit. (b) Calculate the value of the Australian dollar against the Singapore dollar. (c) Calculate the value of the Australian dollar against the Malaysian ringgit.
Question 3 The spot dollar-euro rate is $1.20/€1 and the forward rate is $1.15/€1. You expect the spot dollar-euro rate to be $1.05/€1 in one year's time. You have €1 million to speculate with using the forward exchange market. (iii) What is your profit in both euros and dollars if you are correct and the spot dollar- euro rate is $1.05/€1 in one year's time? (iv) What is your loss in both euros and dollars if you are wrong and the spot dollar-euro rate is $1.40/€1 in one year's time
Match each term in Column A with its related definition in Column B.Column A1. Spot rate2. Currency appreciation3. Translation risk4. Transaction risk5. Exchange rateColumn Ba. The rate at which one currency can be traded for another currency.b. The possibility that future cash transactions will be affected by changing exchange rates.c. A month ago, $1 U.S. was worth 8.5 Mexican pesos. Today, $1 is worth 9.0 Mexicanpesos. The U.S. dollar has undergone what?d. The degree to which a firm’s financial statements are exposed to exchange ratefluctuation.e. The exchange rate of one currency for another for immediate delivery (today).
Calculate the possible rate for buying GBP (Great Britain Pound) in exchange for selling JPY as well as the possible rate for selling GBP in exchange for buying JPY. Assume that the exchange rates are quoted as follows: USD 1 = JPY 104.50-104.60, GBP 1 = USD 1.3260 – 1.3265.
The dollar-euro exchange rate is $1.25 = €1.00 and the dollar-yen exchange rate is ¥100 = $1.00. What is the yen per euro cross rate? cross rate? €1.00 = ¥0.80 C1.00 = ¥125 €125 = ¥1.00 none of the options
E) In this economy, the exchange rate is related to per capita income, interest rate, inflation rate and unemployment rate as Exchange=800+inflation rate-(inflation rate)2+0.001×per capita income+Interest rate+Interest rate2+0.11xUnemployment rate i. Define exchange rate and explain the difference between flexible exchange rate and dirty-float exchange systems (2%) ii. Mention two advantages associated with each system of exchange rate explained above (2%)
Suppose the Japanese yen exchange rate is ¥116/$ 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.
1. Assume the following exchange rates for the New Zealand dollar in terms of the US dollar: North Bank: Bid price = $.401 Ask price = S.404 South Bank: Bid price = $.398 Ask price = S.400 a. Explain the steps involved in locational arbitrage using $1 million. b. What would be your profit?
Suppose the real exchange rate is constant – say, at the level required for net exports (or the current account) to equal zero. In this case, if foreign inflation is higher than domestic inflation, what must happen to the nominal exchange rate over time?
D3)
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?
15. Calculate the current exchange rate AUD/GBP, given these two quotes: AUD/USD 0.5640-50 GBP/USD 1.5850-60 Show the step by step solution.

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