mini case - The (indirect) New York rate is 1/.004700 =...

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e. (1)15,000 (Canadian $) x . 8450 (U.S. $/Canadian $) = $12,675 (2)1,500,000 (Yen) x .004700 ($/Yen) = $ 7,050 (3)55,000 (Swiss-franc) x .5150 ($/Swiss franc) = $28,325. f. (1)20,000 ($) x 1/.004700 (Yen/$) = 4,255,319.15 Yen (2)5,000 ($) x 1/.5150 (Swiss franc/$) = 9,708.74 Swiss franc (3) 15,000 ($) x 1/.8450 (Canadian $/U.S. $) = 17,751.48 Canadian $. g. Recall that the indirect quote = (1/Direct Quote). The results are tabulated below: Foreign Currency / $ Canadian - dollar Spot 1.1834 30 day 1.1884 90 day 1.1919 h. The Tokyo rate is 216.6752 Yen/$.
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Unformatted text preview: The (indirect) New York rate is 1/.004700 = 212.7660 Yen/$. Assuming no transaction costs, the rate between Tokyo and New York are out of line. Arbitrage profits are possible. Yen is cheaper in Tokyo. Buy Yen for $10,000. $10,000 x 216.6752 = 2,166,752 Y. Sell the Yen in New York at the prevailing rate. 2,166,752 x .004700 = $10,183.73 Your net gain is $10,183.73 - $10,000 = $183.73 i. (Canadian dollar/Yen) = ($/Yen) = .004700 (1/.8450) = .00556...
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