33.
Assume the following information:
U.S. investors have $1,000,000 to invest:
1-year deposit rate offered by U.S. banks
=
12%
1-year deposit rate offered on Swiss francs
=
10%
1-year forward rate of Swiss francs
=
$.62
Spot rate of Swiss franc
=
$.60
Given this information:
b.
interest rate parity doesn't exist and covered interest arbitrage by U.S. investors results in a
yield above what is possible domestically.
34.
Assume the following information:
Current spot rate of Australian dollar
=
$.64
Forecasted spot rate of Australian dollar 1 year from now
=
$.59
1-year forward rate of Australian dollar
=
$.62
Annual interest rate for Australian dollar deposit
=
Annual interest rate in the U.S.
=
Given the information in this question, the return from covered interest arbitrage by U.S. investors
with $500,000 to invest is ____%.
e.
about 5.59
35.
Assume the following bid and ask rates of the pound for two banks as shown below:
Bid
Ask
Bank C
$1.61
$1.63
Bank D
$1.58
$1.60
As locational arbitrage occurs:
d.
the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will
increase.
36.
Assume the bid rate of an Australian dollar is $.60 while the ask rate is $.61 at Bank Q. Assume the
bid rate of an Australian dollar is $.62 while the ask rate is $.625 at Bank V. Given this information,
what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much
will you end up with over and above the $1,000,000 you started with?
9%
6%

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37.
Assume the following information for a bank quoting on spot exchange rates:
Exchange rate of Singapore dollar in U.S. $
=
$.60
Exchange rate of pound in U.S. $
=
$1.50
Exchange rate of pound in Singapore dollars
=
S$2.6
Based on the information given, as you and others perform triangular arbitrage, what should logically
happen to the spot exchange rates?

38.
Bank A quotes a bid rate of $.300 and an ask rate of $.305 for the Malaysian ringgit (MYR). Bank B
quotes a bid rate of $.306 and an ask rate of $.310 for the ringgit. What will be the profit for an
investor who has $500,000 available to conduct locational arbitrage?

39.
Which of the following is an example of triangular arbitrage initiation?