The following information is available to a Zambian trader: i. Percentage spread given for Zambian kwacha per US dollar is 0.1%. The ask rate for Zambian kwacha per C$ dollar is K9.526 ii. Canadian dollars per US dollar C$ 1.2780/US$ iii. Kwacha per US dollar K8.524/US$ a) Calculate the bid rate b) Determine if there is any opportunity for arbitration c) Explain How a Zambian trader with K1, 200,000 can use this amount to benefit from the inter market arbitrage? What will be the profit or loss for the trader?

The following information is available to a Zambian trader: i. Percentage spread given for Zambian kwacha per US dollar is 0.1%. The ask rate for Zambian kwacha per C$ dollar is K9.526 ii. Canadian dollars per US dollar C$ 1.2780/US$ iii. Kwacha per US dollar K8.524/US$ a) Calculate the bid rate b) Determine if there is any opportunity for arbitration c) Explain How a Zambian trader with K1, 200,000 can use this amount to benefit from the inter market arbitrage? What will be the profit or loss for the trader?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 2BIC

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The following information is available to a Zambian trader: i. Percentage spread given for Zambian kwacha per US dollar is 0.1%. The ask rate for Zambian kwacha per C$ dollar is K9.526 C$ 1.2780/US$ ii. Canadian dollars per US dollar ii. Kwacha per US dollar K8.524/USŞ a) Calculate the bid rate b) Determine if there is any opportunity for arbitration c) Explain How a Zambian trader with K1, 200,000 can use this amount to benefit from the inter market arbitrage? What will be the profit or loss for the trader?
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