Review Problems A - Answer the following, based on the...

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BUS 631 International Finance and Banking Review Problems A 1. The following quotations are available to you. You may either buy or sell at the stated rates. Singapore bank: KRW888.81/SGD Hong Kong bank: HKD6.4488/SGD Korean bank: KRW136.83/HKD Assume you have SGD1,000,000. Is trilateral arbitrage possible? If so, explain the steps and compute your profit from the arbitrage.
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2. A foreign exchange dealer in Hong Kong normally provides quotes for spot, 1-month, 3- month, and 6-month forward. When you asked over the telephone for current quotations for the HKD against the EUR (HKD/EUR), you heard: “10.2605-15, 60/55, 172/156, 340/310.”
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Unformatted text preview: Answer the following, based on the above quotations. a. What are the spot, 1-month, 3-month, and 6-month forward bid and ask rates? b. How much would you receive in HKD if you sold EUR1,000,000 spot? c. How much would it cost you in HKD to purchase EUR2,000,000 three months forward? 3. Assume the following information: Spot rate: USD1.1250/CHF 6-month forward rate: USD1.1320/CHF 6-month CHF interest rate: 3% p.a. 6-month USD interest rate: 4% p.a. Given this information, is covered interest arbitrage worthwhile for U.S. investors? If so, explain the arbitrage operations and compute the profit if you have USD1,000,000 to use....
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This note was uploaded on 12/02/2011 for the course BUSINESS 0902102028 taught by Professor Issam during the Spring '10 term at Bradford School of Business.

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Review Problems A - Answer the following, based on the...

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