International_Finance_Project_3

International_Financ - International Finance Project 3 1 Suppose the spot ask exchange rate Sa($| is $1.90 = 1.00 and the spot bid exchange rate

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
International Finance Project 3 _________________________________________________ 1. Suppose the spot ask exchange rate, S a ($| ), is $1.90 = 1.00 and the spot bid exchange rate, S b ($| ), is $1.89 = 1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be "eaten" by the bid-ask spread? A. $1,000,000 B. $52,910.05 C. $100,000 D. $52,631.58 firt buy $10m in pounds: $10,000,000 x ? .00 = ? , 263,157.895 $1.90 Rational: then sell the pounds for dollars : ? , 263,157.895 x $1.89 = $9,947,368.42 ?.00 Net loss to bid – ask spread = $10,000.000 - $9,947,368.42 = $ 52,631.58 2. If the $/€ bid and ask prices are $1.50/€ and $1.51/€, respectively, the corresponding €/$ bid and ask prices are: A. €0.6667 and €0.6623 B. $1.51 and $1.50 C. €0.6623 and €0.6667 D. cannot be determined with the information given
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
3. Suppose you observe the following exchange rates: €1 = $1.25; 1 = $2.00. Calculate the euro-pound exchange rate. A. €1 = 1.60 B. €1 = 0.625 C. €2.50 = 1 D. €1 = 2.50 suppose that S($/ €) = 1.50 ie $1.50- €1.00 and that S($/ €) – 2.00 ie € 1.00+$2.00 what is the cross rate be? Suppose that S($/€ = 1.50 ie $1.50- € 1.00 and that S(yeh/ €) -50 ie €1.00 - ¥ 50 $1.50 x € 1.00- $1.50 €1.00 ¥ 50 ¥ 50 S1.00 = ¥ 33.33 $0.0300= ¥ 1
Background image of page 2
4. The AUD/$ spot exchange rate is AUD1.60/$ and the SF/$ is SF1.25/$. The AUD/SF cross exchange rate is: A. 0.7813 B. 2.0000 C. 1.2800 D. 0.3500 Rationale: AUD 1.60 x $1 = AUD 1.28 $ 1 SF 1.25 SF 1.25 5. Suppose you observe the following exchange rates: €1 = $1.50; × 120 = $1.00. Calculate the euro-pound exchange rate. A. × 133.33 = €1.00 B. €1.00 = × 180 C. × 80 = €1.00 D. €1 = 2.50 6. Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = 1.00. A. €1.25/
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/03/2011 for the course ECON 542 taught by Professor John during the Spring '11 term at Colorado College.

Page1 / 8

International_Financ - International Finance Project 3 1 Suppose the spot ask exchange rate Sa($| is $1.90 = 1.00 and the spot bid exchange rate

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online