Assume the following information for a bank quoting on spot exchange rates: Exchange rate of Singapore dollar in USD = 0.32 USD/SGD Exchange rate of pound in USD = 1.50 USD/GBP Exchange rate of pound in Singapore dollars = 4.50 SGD/GBP Based on the information given, as you and others perform triangular arbitrage, what should logically happen to the spot exchange rates?
Choose all that apply.
USD/SGD goes up
USD/SGD goes down
USD/GBP goes up
USD/GBP goes down
SGD/GBP goes up
SGD/GBP goes down
OMG/LOL goes sideways
Lets say u have 1 USD
Sell USD and buy SGD=1/0.32 SGD
Sell SGD and buy GBP=1/4.5*1/0.32 GBP
Sell GBP and buy USD=1.5*1/4.5*1/0.32=1.04167 USD
So profit of 0.04167 USD per USD
As people will sell USD and buy SGD USD/SGD goes up
As people will sell SGD and buy GBP SGD/GBP goes up
As people will sell GBP and buy USD USD/GBP goes down
USD/SGD goes up
USD/GBP goes down
SGD/GBP goes up
Assume the following information for a bank quoting on spot exchange rates: Exchange rate of Singapore...
1. (5 points) Assume the following information for a bank quoting on spot exchange rates: Exchange rate of pound in U.S. S Exchange rate of Singapore dollar in U.S. $ Exchange rate of pound in Singapore dollars $1.50 $.30 S$5.20 Given this information, if triangular arbitrage is possible, which of the following answer is the correct arbitrage strategy. a). Convert USD to Singapore dollar, then to British pound, and finally back to USD b). Convert USD to British pound, then...
Assume that you have the following information: Spot Rate: Six-month Forward Exchange Rate: One-Year NZD Interest Rate: One-Year GBP Interest Rate: NZD: New Zealand Dollar GBP: Great Britain Pound 1.98 NZD/1 GBP 2.07 NZD/1 GBP 0.63 % annually -0.26 % annually is covered interest arbitrage worthwhile? If so, calculate the profits after six-months, assuming that you have 5,650 NZD. What else might you do to maximize profits if the covered interest arbitrage is worthwhile (explain in words)?
QUESTION 1: Suppose that the current spot exchange rate is GBP1= €1.50 and the one-year forward exchange rate is GBP1=€1.60. One-year interest rate is 5.4% in euros and 5.2% in pounds. If you have EUR1,000,000, what is the Covered Interest arbitrage profit in EUR? QUESTION 2: Suppose that the current spot exchange rate is GBP1= €1.50 and the one-year forward exchange rate is GBP1=€1.60. One-year interest rate is 5.4% in euros and 5.2% in pounds. If you conduct covered interest...
Suppose that the exchange rate (spot price) of Euro in GBP (British Pound) is GBP 0.95. In addition, assume that you can freely borrow and lend in GBP for any maturity at a rate of 2% per annum and that you can do the same in Euro at a rate of 1% per annum. Both rates are continuously compounded rates. Given these assumptions: Compute the forward price (exchange rate) of the GBP in Euro for delivery of the GBP in...
A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar: SFr/USD = 1.56/8; AUD/USD = 1.75/7. An firm asks the bank for an SFr/AUD quote. What the cross-rate would the bank quote for the ask price (please round to 2 digit)?
Assume the following information: 1-year interest rate on U.S. dollars = 11.1% 1-year interest rate on Singapore dollars = 8.1% Spot rate of Singapore dollar = 0.44 USD/SGD If interest rate parity is in effect, what should be the 1 year forward premium on the SGD? Enter answer in percents.
PROBLEMS: 1. A bank is quoting the following exchange rates against the dollar pound and the Australian dollar: for the British A$/$ 1.7225-35 An Australian firm asks the bank for an AS/E quote. What cross-rate would the bank quote?
QUESTION 21 Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is V115 $1. Rinaldo finds out that the rate quoted in New York at 10:00 a.m. (3:00 p.m. London time) is V135 = $1. Rinaldo decides to buy yen in New York and sell it in London. Rinaldo is engaging in currency swapping. currency speculation carry trade. arbitrage. 1 points Save Answer QUESTION 22 Assume you are an Israeli investor, the symbol for the Israeli currency,...
3. You are given the following exchange rates: Exchange Rates Time 0 Time 1 So Si USD / GBP 1.8558 1.8561 USD/EUR 1.2674 1.2622 CAD / USD 1.3111 1.3129 MXN / USD 10.7575 10.6780 AUD/USD 1.3095 1.3025 ZAR / USD 6.8330 6.8850 Where: GBP = British Pound: CAD Canadian Dollar; MXN - Mexican Peso; AUD = Australian Dollar; ZAR = South African Rand Using the information above: a. Which foreign currencies are directly quoted? b. Which foreign currencies are indirectly...
A. Take the following two exchange rates and compute the EUR/INR cross exchange rate. INR12.1225/USD EUR 8.145/USD.B. In question A, if there is a direct cross exchange rate of EUR.66215/INR, is there a triangular arbitrage opportunity? If yes, start with $50,000 and indicate how much triangular arbitrage profit exists for 1 trip around the triangle.