Quiz 2 (Version B)Solution

# Quiz 2 (Version B)Solution - Version B Fin 536 Quiz 2...

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Version B Fin 536 Quiz 2 Solutions Name________________________Section_4pm/7pm 1. (5pts)Fill out the answers. a. Henry borrows ¥1,000,000 at an interest rate i ¥ =2%; converts it into Australian dollars at the current spot rate S(¥/AU\$)=82; deposits the funds in a Australian savings account for a year at interest rate of i AU\$ =6%. At the end of year, Henry converts his revenue in Australian dollars back into yens at the spot rate S 1 (¥/AU\$). Compute his net profit in the following scenarios. If the spot rate is S 1 (¥/AU\$)=86, the net profit/loss is ¥__91707.32 ____. If the spot rate is S 1 (¥/AU\$)=75, the net profit/loss is ¥__ - 50487.80 ___. If the spot rate is S 1 (¥/AU\$)=_____78.91 __, Henry will have zero profit. b. Three banks are quoting the following rates: Citibank quotes \$1.93/£; UBS quotes €1.25/£; Deutsche Bank quotes \$1.42/€. The cross rate from Citibank and UBS is S c (\$/€)=__1.54 _______. If you start with \$1000, you profit will be \$_____87.32 _____ from arbitrage. The direction of arbitrage implies _____selling _____ (buying/selling) \$ from(or to) Deutsche Bank. c.

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## This note was uploaded on 12/06/2011 for the course FIN 536 taught by Professor Staff during the Fall '11 term at S.F. State.

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Quiz 2 (Version B)Solution - Version B Fin 536 Quiz 2...

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