Question

You are responsible for managing foreign exchange risk at your company. You need to do the transactions listed below. In each case what price do you trade at? a. Sell € 5 million. Bank America quotes you $1.1250 - $1.1265 b. Buy ¥ 200 million. JP Morgan quotes you ¥110.00 - ¥110.10 c. Buy £ 10 million. Citibank quotes you $1.2500 - $1.2511

Answer 1

Here,

You need to sell Euro 5 million

Quote,

$1.1250 - $1.1265

Since you need to sell Euro you need to buy $ at lower price , i.e price for you will be $1.1250

You need to Buy Yen 200 million

Quote,

Yen 110-110.1

Since you need to Buy Yen you need to buy Yen at higher price , i.e price for you will be Yen 110.1

You need to Buy Pound 10 million

Quote,

$1.25-$1.2511

Since you need to Buy Pound you need to sell dollar at lower price , i.e price for you will be $1.25