Question

Assume there is a direct cross market for GBP/Sf. Assume the spot FX rates with the...

Assume there is a direct cross market for GBP/Sf. Assume the spot FX rates with the USD are 1.5 Sf/$ and 1.50 $/£.
What should be the direct cross-rate be for Sf/£?

If the direct cross-rate is 2.50 Sf/£, what three deals can you do to lock in a risk free profit on 1 unit of the base currency? Calculate the arbitrage profit.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume spot FX rates of $1.3754/Euro and $1.6561/BP. What should the cross    exchange rate for Euro/BP...
Assume spot FX rates of $1.3754/Euro and $1.6561/BP. What should the cross    exchange rate for Euro/BP (Euros per unit of BP)? If the market rate is 1.286Euro/BP, describe the arbitrage strategy. Assume that you have $100,000 to invest, what will be profit of the arbitrage strategy (so your work step by step)?   If arbitrage profit exists,      what market forces would occur to eliminate the arbitrage opportunity?
Currently, the spot exchange rate is 1.50 USD/GBP and the three-month forward exchange rate is 1.510...
Currently, the spot exchange rate is 1.50 USD/GBP and the three-month forward exchange rate is 1.510 USD/GBP. The three-month interest rate is 5.0% per annum in the U.S. and 2.0% per annum in the UK. Assume that you can borrow as much as $1,500,000 or £1,000,000. a/ What is the implied three-month U.S.per annuminterest rate? (round to 2 decimals in %) b/ Does Interest Rate Parity hold? c/ Determine the arbitrage profit (if any, otherwise type "0") and report it...
The following spot rates are quoted: USD/ GBP 1.3024 - 89 TTD/GBP 8.2965 - 5745 (a)...
The following spot rates are quoted: USD/ GBP 1.3024 - 89 TTD/GBP 8.2965 - 5745 (a) Using a cross rate, calculate the bid-ask spread for the TTD/USD exchange rate. (b) If TTD/USD was actually quoted at 6.6514-7836, calculate how much arbitrage profit (in TTD) could be earned from TTD1,000.
Market Quotation FX Rate Zurich EUR / GBP 0.8832 Chicago GBP / USD 1.2649 London EUR...
Market Quotation FX Rate Zurich EUR / GBP 0.8832 Chicago GBP / USD 1.2649 London EUR / USD 1.1158 Is there an arbitrage opportunity? (ignore transactions costs and taxes) If there is an arbitrage opportunity, calculate the profit for 1,000,000 EUR and show all the transactions carried at each market.
Assume that the spot exchange rate is 1.38 USD/GBP, while interest rates are 3.2% in the...
Assume that the spot exchange rate is 1.38 USD/GBP, while interest rates are 3.2% in the US and 2.5% in the UK. a. According to international parity conditions, what is the expected 6-month forward exchange rate? b. You believe that political conditions are such that the GBP will lose value in the coming six months. What position should you take in the forward market? c. If you take the position chosen in part B and the spot rate in six...
The following table contains information on spot and forward exchange rates among U.S. dollar (USD), Malaysian...
The following table contains information on spot and forward exchange rates among U.S. dollar (USD), Malaysian ringgit (MYR), Japanese yen (JPY) and Canadian dollar (CAD). Currencies 3-month forward rate Spot rate USD/MYR 4.3936 4.3610 USD/JPY 107.3333 107.6400 USD/CAD 1.3856 1.3839 The following table contains information on the 3-month nominal risk-free rate per annum for the four different currencies 3-month nominal risk-free rate MYR USD CAD JPY 4.00% 1.00% 1.50% 0.00% Note that the Japanese yen 3-month nominal risk-free rate is...
In March 8th 2020, In London 1 $ = £ 0.7656, while in Zurich 1 SF...
In March 8th 2020, In London 1 $ = £ 0.7656, while in Zurich 1 SF = $1.08, but you found out that at JP Morgan, the cross rate between CHF and GBP is: 1 SF = £ 0.9264. If you are a trader at Citibank, and you have USD 1,000,000 for an arbitrage. Is there any arbitrage profit that could be made with a triangular arbitrage action? Describe an example of how such a profit may be earned (draw...
1)Citibank quotes USD1.8500/GBP, Barclays quotes EUR1.5000/GBP, and Dresdner quotes USD1.2000/EUR. If you have USD 1,000,000 to...
1)Citibank quotes USD1.8500/GBP, Barclays quotes EUR1.5000/GBP, and Dresdner quotes USD1.2000/EUR. If you have USD 1,000,000 to invest, find the triangular arbitrage profit. 2)Amanda Smyth is a foreign exchange dealer for a bank in Texas. She has USD 1,000,000 for a short-term money market investment and wonders if she should invest in U.S. dollars for six months or make a covered interest arbitrage (CIA) investment in the Japanese yen. If she makes the CIA investment, what is the total amount that...
Rizzo Company (RC) has GBP 1 million receivables due in one year. While the current spot...
Rizzo Company (RC) has GBP 1 million receivables due in one year. While the current spot price of GBP is USD 1.31, RC expects the future spot rate of British pound to fall to approximately $1.25 in a year so it decides to avoid exchange rate risk by hedging these receivables. The strike price of American-style put options are $1.29. The premium on the put options is $.02 per unit. Assume there are no other transaction costs. Finally, there is...
Suppose the following prevailed in the foreign currency market: $/€ (USD/EUR) spot: 1.800 $/€ (USD/EUR 90...
Suppose the following prevailed in the foreign currency market: $/€ (USD/EUR) spot: 1.800 $/€ (USD/EUR 90 day forward: 1.0810 $ (USD) interest rates 0.0075 (75 basis points or three fourths of one percent) € (EUR) interest rates 0.0010 (10 basis points or one tenth of one percent ) Use these data to answer the following three questions. Question 12 (1 point) What is the forward premium/discount of the € (EUR)? Question 13 (1 point) What is the USD - EUR...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT