Question 3 Assuming the following quotes, calculate how a market trader at Citibank with $1,000,000 can make an intermarket arbitrage profit.: Citibank quotes U.S. dollar per pound: National Westminster quotes euros per pound: $1.5900/£ €1.2000/£ Deutsch bank quotes U.S. dollar per euro: $0.7550/€
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- Assuming the following quotes: Citibank quotes U.S. dollars per pound at $1.5400/£ National Westminster quotes euro per pound at €1.6000/£ Deutsche bank quotes dollars per euro at $0.9700/€ Is there an arbitrage opportunity based on these quotations? If so, show how a market trader with one million $ (1,000.000 $) can make an inter-market arbitrage profit, and calculate that profit.Considering the following quotes from three banks: London Bank: €1.0837/£ Hong Kong Bank: U$1.1944/£ Tokyo Bank: €0.9582/U$ Ignoring transaction costs, is there an arbitrage opportunity based on these quotes? Justify your answer through calculations. If yes, what steps would you take to make an arbitrage profit and how much profit in US dollars would you make if you are authorized to use 10 million US dollars for this purpose?Match each term in Column A with its related definition in Column B. Column A 1. ____________ Spot rate 2. ____________ Currency appreciation 3. ____________ Translation risk 4. ____________ Transaction risk 5. ____________ Exchange rate Column B a. The rate at which one currency can be traded for another currency. b. The possibility that future cash transactions will be affected by changing exchange rates. c. A month ago, 1 U.S. was worth 8.5 Mexican pesos. Today, 1 is worth 9.0 Mexican pesos. The U.S. dollar has undergone what? d. The degree to which a firms financial statements are exposed to exchange rate fluctuation. e. The exchange rate of one currency for another for immediate delivery (today).
- Match each term in Column A with its related definition in Column B.Column A1. Spot rate2. Currency appreciation3. Translation risk4. Transaction risk5. Exchange rateColumn Ba. The rate at which one currency can be traded for another currency.b. The possibility that future cash transactions will be affected by changing exchange rates.c. A month ago, $1 U.S. was worth 8.5 Mexican pesos. Today, $1 is worth 9.0 Mexicanpesos. The U.S. dollar has undergone what?d. The degree to which a firm’s financial statements are exposed to exchange ratefluctuation.e. The exchange rate of one currency for another for immediate delivery (today).James Clark is a foreign exchange trader with Citibank. He notices the following quotes. (12’)Spot exchange rate SFr1.2051/$Six-month forward exchange rate SFr1.1922/$Six-month $ interest rate 2.5% per yearSix-month SFr interest rate 2.0% per yeara. Is the interest rate parity holding? You may ignore transaction costs.b. Is there an arbitrage opportunity? If yes, show what steps need to be taken to make arbitrage profit. Assuming that James Clark is authorized to work with $1,000,000, compute the arbitrage profit in dollars.?a) Assume the following information: 180‑day U.S. interest rate = 8% 180‑day British interest rate = 9% 180‑day forward rate of British pound = $1.50 Spot rate of British pound = $1.48 Assume that a U.S. exporter will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge. b) As treasurer of a U.S. exporter to Canada, you must decide how to hedge (if at all) future receivables of 250,000 Canadian dollars 90 days from now. Put options are available for a premium of $.03 per unit and an exercise price of $.80 per Canadian dollar (CA$). The forecasted spot rate of the CA$ in 90 days follows: Future Spot Rate Probability (%) $.75 50…
- Question 1 You are considering uncovered interest arbitrage between the pound (GBP) and the US dollar (USD). The following data is available to you: Funds available: 2 million GBP Spot exchange rate: 1.40 USD per GBP Spot exchange rate one year ago: 1.26 USD per GBP USD 3 month interest rate: 2.32% GBP 3 month interest rate: 0.75% a) Calculate the profit that would be made if the exchange rate remains at its current level in 3 months' time. b) How would the profit figure change if the US dollar continues to weaken at the same rate as it has done over the previous year?Suppose a bank provides the following quotes: Bid 1.2567 CAD per U.S. Dollar and Ask 1.2682 CAD per U.S. Dollar Suppose you would like to buy Canadian Dollars and sell U.S. Dollars. Given the quotes above, what rate would you receive? Group of answer choices 0.0115 CAD per USD 2.5249 CAD per USD 1.2682 CAD per USD 1.2567 CAD per USDTB SA Qu. 06-69 If you had borrowed $1,000,000.... Use the information below to answer the following question. Exchange Rate $ 1.60 €1.00 $1.58 € 1.00 So ( $/ €) F360 ($/C) Interest Rate is ic APR 28 4% If you had borrowed $1,000,000, traded them for euro at the spot rate, and invested those euros in Europe, how many euros will you receive in one year?
- 1. Assume you notice the following information. Assume you spend $1 million USD to create an arbitrage trading strategy. What is your profit is USD. Remember to consider the profit after you pay back your loan Spot (CAD/USD)=1.75 • 1 Year Forward (CAD/USD) = 1.65 • 1 Year Canadian interest rate of 3% in Canadian Dollars (CAD) • 1 Year US interest rate of 4% in US Dollars (USD) 592,484.85list down base rate and quote rate currency from question 1 to 5 1. Jack Ma, a foreign exchange trader in Canada, has CAD. 4,000,000 for short-term money market investment and wants to make a profit based on the following rates. Explain specific steps that Jack Ma must take to make a covered interest arbitrage. CAD= Canadian Dollar JYP= Japanese Yen 6-month Canadian interest rate 1.6% per annum 6-month Yen interest rate 2.95% per annum Spot rate JYP 93.1395/CAD 6-month forward rate JYP 93.8380/CAD 2. Cecilia who is a currency trader in Japan observes the following market conditions: • Annual interest rate in Japan: 1.5% per annum • Annual interest rate in France: 7.0% per annum • Current spot exchange rate: ¥ 114.4733/€ • One-year forward exchange rate: ¥ 110.2423/€ • No transaction costs If Cecilia can borrow ¥100,000,000, specific the transactions he may carry out in order to make some arbitrage profit and calculate the amount of the profit. 3. Given…Assume the following information regarding U.S. and European annualized interest rates: Currency U.S. Dollar ($) 4.5% Investment Rate Borrowing Rate 5.5% Euro (€) 5.1% 6.3% Golden R Inc. can borrow either $6 million or €5 million. The current spot rate of the euro is $1.02. Furthermore, Golden R Inc. expects the spot rate of the euro to be $1.35 in 60 days. What is Golden R. Inc.'s dollar profit from speculating if the spot rate of the euro is indeed $1.35 in 60 days? Your answer should be whole US dollars. No decimals.