Question

1. Your company offered you an expatriate position

and gave you two options to choose from. You may

either move to Austria or Australia. You will receive

the same salary regardless of which country

you choose. A friend mentions to you that the

OECD Statistics portal includes data on “comparative

price levels.” Find the latest data for Australia

and Austria and discuss how your purchasing

power in one country will compare to the other.

Which country is more advantageous? How does

the OECD use concept of PPP to calculate the

comparative price levels?

2-You are the finance manager of a company and currently

your company has $100 million in cash that

will not be needed for a few more weeks. You are

thinking about arbitrage opportunities using Euro

and GBP in order to put the cash reserves into use

and hopefully earn more money for your company.

You have to make a decision about details of your

arbitrage with regard to which currency to buy in

which order. Check exchange rates, find current

rates for USD, Euro, and GBP, and share the details

of your arbitrage plan with your CEO. Is it possible

to find an arbitrage trade to generate some profits

(assume you will have no trading costs)? If so, what

should be the order of your transactions in order to

make a profit from this arbitrage operation?

Answer 1

1 Answer:

To think about the buying power is one nation as for the buying power is another nation cost records in the two nations are seen and looked at comparision of the value measurements uncovers that customer costs in austrelia are 0.41 percent higer prices.Hower significantly after significant expenses, nearby buying power is Austrelia is more that in Austrelia.

In this way Austrelia is moore invaluable nation to choose as an alternative .the value level on both th nations are devided by the OCED to compute relative value level in the two nations.

2 Answer:

I will separate things coherently. At the beginning, these sorts of inquiries for the most part give remote trade rates, for example, the value of GBP in USD terms, worth of Euro in GBP terms, worth of USD in Euro terms, and so on.

At that point, you are relied upon to see whether we can get some remote money utilizing home cash, at that point convert the outside money to another outside money, and afterward convert this second remote money to home money (or in some other request). This could bring about us getting more than what we utilized in any case. This is called Exchange Addition.

Presently, in light of the fact that the inquiry doesn't give the remote trade rates, a few specialists here requested that you give the equivalent. In any case, the inquiry as of now says "Check trade rates, discover current rates for USD, Euro, and GBP". Along these lines, we have to take it from current remote trade rates.

Trade Rates: These are the remote trade rates on the fifth of October, 2019 at 11:22 AM (UTC) [Actual data]:

1 USD = 0.81 GBP

1 GBP = 1.12 Euro

1 Euro = 1.10 USD

Request of Exchanges for Exchange:

You have 100 million USD. (given)

1. Purchase Euro with 100 million USD = 100 million USD x 1/1.1 = 90.909090 million Euro

2. Purchase GBP with 90.909090 million Euro = 90.909090 million Euro x 1/1.12 = 81.168830 million GBP

3. Purchase USD with 81.168830 million GBP = 81.168830 million GBP x 1/0.81 = 100.208432 million USD.

Along these lines, you contributed $100 million and made sure about $100.20843 million, showing an exchange loss of $0.208432 million.