Homework Answers
Sell $250,000, Buy MXP
= $250,000 * (1 / 0.077)
= MXP 3,246,753.247
Sell MXP 3,246,753.247, Buy AUD
= MXP 3,246,753.247 * (1 / 8.5)
= AUD 381,970.9702
Sell AUD 381,970.9702. Buy USD
= AUD 381,970.9702 * 0.67
= $255,921
Arbitrage profit = $255,921 - $250,000 = $5,921
Arbitrage profit = $5,921.
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Assume the following information: Quoted Bid Price $0.67 5.074 Value of an Australian dollar (AS) in...
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a) Bid Price of New Zealand Dollar - JP Morgan Bank USD0.6533 and Well Fargo USD0.6503 Ask Price of New Zealand Dollar - JP Morgan Bank USD0.6563 and Well Fargo USD0.6523 Justify whether locational arbitrage is possible. If so, explain the steps involved in locational arbitrage, and estimate the profit from this arbitrage if you had USD1,000,000 to use. Discuss market forces factors that would occur to eliminate any further possibilities of locational arbitrage. (6 marks) b) Currency Pair Quoted...
Assume the following information: 2. Quoted Price $0.93 Value of Canadian dollar in U.S. dollars Value of New Zeala...
Assume the following information: 2. Quoted Price $0.93 Value of Canadian dollar in U.S. dollars Value of New Zealand dollar in U.S. dollars Value of Canadian dollar in New Zealand dollars $0.30 NZ$3.02 a) Calculate the profit from triangular arbitrage if you start with $1,000,000, show steps. b) Canadian dollar with respect to the U.S. dollar would rise, True or False? c) The value of the Canadian dollar with respect to the New Zealand dollar would decline, True or False?...
Assume the following information: &nbs
Assume the following information: Quoted Price Value of GBP in U.S. dollars $1.40 Value of Australian dollar in U.S. dollars $.80 Value of GBP in Australian dollars AU$1.78 Is triangular arbitrage possible? If so, how much you can benefit from this strategy if you had $1,000,000 to use. What market forces would occur to eliminate any further possibilities of triangular arbitrage?
Assume the following information: USD/AUD, bid/ask: 0.65 / 0.72 USD/MXP, bid/ask: 0.072 / 0.075 MXP/AUD, bid/ask:...
Assume the following information: USD/AUD, bid/ask: 0.65 / 0.72 USD/MXP, bid/ask: 0.072 / 0.075 MXP/AUD, bid/ask: 8.09 / 8.49 Assume you have 1 million USD to conduct one cycle of triangular arbitrage. What will be your profit from implementing this strategy? Remember to pay careful attention whether you're trading at the bid or the ask with the bank.
Question 1 a) Assume the following information: Quoted Price Value of one Euro in U.S. dollars...
Question 1 a) Assume the following information: Quoted Price Value of one Euro in U.S. dollars = 1.12 Value of one New Zealand dollar in U.S. dollars = 0.64 Value of one New Zealand in Euro - 0.55 Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage, and compute the profit from this strategy if you had $2,000,000 to use. What market forces would occur to eliminate any further possibilities of triangular...
2. Assume the following information: Value of Canadian dollar in U.S. dollars Value of New Zealand...
2. Assume the following information: Value of Canadian dollar in U.S. dollars Value of New Zealand dollar in U.S. dollars Value of Canadian dollar in New Zealand dollars Quoted Price $0.93 $0.30 NZ$3.02 a) Calculate the profit from triangular arbitrage if you start with $1,000,000, show steps. b) Canadian dollar with respect to the U.S. dollar would rise, True or False? c) The value of the Canadian dollar with respect to the New Zealand dollar would decline, True or False?...
23. Assume the following information: You have $900,000 to invest: Current spot rate of Australian dollar...
23. Assume the following information: You have $900,000 to invest: Current spot rate of Australian dollar (AS) 180-day forward rate of the Australian dollar 180-day interest rate in the U.S. 180-day interest rate in Australia $.62 -.64 3.5% 3.0% If you conduct covered interest arbitrage, what is the dollar profit you will have realized after 180 days?
3. Assume the following information: Quoted Price Spot rate of Canadian dollar $0.81 90day forward rate of Canadian...
3. Assume the following information: Quoted Price Spot rate of Canadian dollar $0.81 90day forward rate of Canadian dollar $0.79 90day Canadian interest rate 4% (per 90 days) 90day U.S. interest rate 2.5% (per 90 days) a) Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1,000,000.) b) The forward rate should rise, True or False?
Assume the following information: Philippine Peso AF Bank LifeStore Bank Bid Price $.0192 $.0186 Ask Price...
Assume the following information: Philippine Peso AF Bank LifeStore Bank Bid Price $.0192 $.0186 Ask Price $.0197 $.0189 Assuming you have $1,000,000 to invest, what would your profits (in dollars) be from Locational Arbitrage? If it is not possible to profit, answer 0. Round your answer to the nearest whole number and don't use commas or currency signs. If your answer is negative, indicate that with a dash in front of the number (ie. -98026). Answer:
Questions 3. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollar against...
Questions 3. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollar against the U.S. dollar would affect the return to a U.S. firm that invested in an Australian money market security 4. Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yen against the U.S. dollar would affect the return to a U.S. firm that borrowed Japanese yen and used the proceeds for a U.S. project. 6. Bid/ask Spread. Utah Bank's s bid...
Assume the following information: 2. Quoted Price $0.93 Value of Canadian dollar in U.S. dollars Value of New Zealand dollar in U.S. dollars Value of Canadian dollar in New Zealand dollars $0.30 NZ$3.02 a) Calculate the profit from triangular arbitrage if you start with $1,000,000, show steps. b) Canadian dollar with respect to the U.S. dollar would rise, True or False? c) The value of the Canadian dollar with respect to the New Zealand dollar would decline, True or False?...
Question 1 a) Assume the following information: Quoted Price Value of one Euro in U.S. dollars = 1.12 Value of one New Zealand dollar in U.S. dollars = 0.64 Value of one New Zealand in Euro - 0.55 Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage, and compute the profit from this strategy if you had $2,000,000 to use. What market forces would occur to eliminate any further possibilities of triangular...
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23. Assume the following information: You have $900,000 to invest: Current spot rate of Australian dollar (AS) 180-day forward rate of the Australian dollar 180-day interest rate in the U.S. 180-day interest rate in Australia $.62 -.64 3.5% 3.0% If you conduct covered interest arbitrage, what is the dollar profit you will have realized after 180 days?
3. Assume the following information: Quoted Price Spot rate of Canadian dollar $0.81 90day forward rate of Canadian dollar $0.79 90day Canadian interest rate 4% (per 90 days) 90day U.S. interest rate 2.5% (per 90 days) a) Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1,000,000.) b) The forward rate should rise, True or False?
Questions 3. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollar against the U.S. dollar would affect the return to a U.S. firm that invested in an Australian money market security 4. Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yen against the U.S. dollar would affect the return to a U.S. firm that borrowed Japanese yen and used the proceeds for a U.S. project. 6. Bid/ask Spread. Utah Bank's s bid...
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