Answered: suppose that an ounce of gold is equal…

suppose that an ounce of gold is equal to $25 in US the exchange rate between USD and GBP is USD/GBP=0.8 compute the value of gold against GBP

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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suppose that an ounce of gold is equal to $25 in US

the exchange rate between USD and GBP is USD/GBP=0.8

compute the value of gold against GBP

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Suppose that gold costs USD 330 an ounce in the United States and GBP 220 an ounce in UK. What must be the GBP / USD rate? •Suppose that gold prices rise by 2% in US and by 5% in UK. What will be the price of gold in the two currencies atthe end of the year? What must be the exchange rate at the end of the year? •Show that at the end of the year each dolar buys 3% more GBP as predicted in PPP. •What are current gold prices in US and UK or EU?
Suppose that 1 British pound currently equals 1.62 U.S. dollars and 1 U.S. dollar equals 1.62 Swiss francs. What is the cross exchange rate between the pound and the frane? a. 1 British pound equals 0.3810 Swiss francs O b. 1 British pound equals 2.6244 Swiss francs 0 Oc1 British pound equals 3.2400 Swiss francs O d. 1 British pound equals 1.0000 Swiss francs O e. 1 British pound equals 1.8588 Swiss francs D
Suppose that the current EUR/GBP rate is 0.6668 and the one-year forward exchange rate is 0.6742. The one-year interest rate is 1.8% in euros and 3.6% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount. Suppose you are a pound-based investor. Determine the profit/loss (in GBP, no cents) if you borrow locally and invest in Euros.
Golden Ounce. Under the gold standard, the price of an ounce of gold in U.S. dollars was $20.62, while the price of that same ounce in British pounds was £3.8565. What would be the exchange rate between the dollar and the pound if the U.S. dollar price had been $42.83 per ounce of gold? C The implied $/£ exchange rate if the U.S. dollar price is $20.62/oz of gold is $£. (Round to four decimal places.) The implied $/£ exchange rate if the U.S. dollar price had been $42.83/oz of gold is $£. (Round to four decimal places.)
Let's say a bank offers the following exchange rates between US Dollar ($), Euro (€), British Pound (£) and Japanese Yen (¥): $/€ 1.20 i.e., €1 equals $1.20 $/£1.40 i.e., £1 equals $1.40 €/£1,16 i.e., £1 equals €1.16 ¥/$120 i.e., $1 equals 120¥ ¥/€140 i.e., €1 equals 140¥ Show how you can make a profit with triangular arbitrage by trading at the above exchange rates by following two alternative strategies. More specifically, the first strategy should only use transactions/conversions between dollar ($), Euro (€) and poundsterling (£), while the second strategy should only use transactions/conversions between dollar ($), Euro (€) and Japanese yen (¥). In both strategies, suppose you start with $1 ($) in your hands. Calculate the profit of each strategy. Which of the two strategies is more advantageous?
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If the exchange rate is such that $1 equals 5 euros, then the price of a euro is $5 $1 $0.40 $0.20
A bank in Mississauga has a buying rate of ¥1 = C$0.01205. If the exchange rate is ¥1 = C$0.01255, calculate the rate of commission that the bank charges to buy currencies. % Round to two decimal places

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