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problemsintecon1

# problemsintecon1 - 1 Complete the exchange rate matrix...

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1. Complete the exchange rate matrix below. Round off your answers to the fourth decimal place. Currency Sold Currency Bought \$ Pound Euro Yen \$ 1 1.5000 1.0600 0.0083 Pound .6667 1 .7067 .0055 Euro .9434 1.4151 1 .0078 Yen 120.4819 180.7229 127.7108 1 2. A European firm wants to buy yen and faces the following exchange rates: Euro 0.0084/yen; Euro 0.9434/\$ and \$ 0.0083/Yen. Should the firm arbitrage through the dollar to make the purchase? What is the purchase price in this case? Ans. = € .0078, arbitrage through \$ 3. A British firm wants to buy Euros and faces the following rates: Pound 0.7000/Euro; Pound 0.6667/\$ and \$1.0600/Euro. Should the firm arbitrage through the dollar to make the purchase? What is the purchase price in this case? Ans. = £ 0.7067, do not arbitrage through \$ Find the premium/discount of the following four currencies in the forward market. Currency Spot Rate 180 Day Forward Rate Premium/Discount 0.27% 4. British Pound \$1.5000/Pound \$1.5020/pound _______________

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problemsintecon1 - 1 Complete the exchange rate matrix...

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