Question

In: Finance

Anna specializes in cross-rate arbitrage. She notices the following quotes: Assume that she has $1 million...

Anna specializes in cross-rate arbitrage. She notices the following quotes:

Assume that she has $1 million available to conduct the arbitrage, show how much Anna can make a triangular arbitrage profit by trading at these prices.

What yen/euro price will eliminate the triangular arbitrage opportunity?

1. Bank 1:Yen / US dollar = JPY 108.0000 / USD

2. Bank 2: US dollar / euro = USD 1.1200/ EUR

3. Bank 3: Yen / EUR = JPY 124.0000 / EUR

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE


Related Solutions

Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: 1. Crédit Lyonnais: Yen /...
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: 1. Crédit Lyonnais: Yen / US dollar = JPY 111.0000 / USD 2. Barclays: US dollar / euro = USD 1.2200/ EUR 3. Crédit Agricole: Yen / EUR = JPY 137.0000 / EUR Ignoring transaction costs, show how much Doug Bernard can make a triangular arbitrage profit by trading at these prices. Assume that he has $1 million available to conduct the arbitrage and calculate the arbitrage profit in...
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/dollar = SFr1.6085/$ Australian...
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/dollar = SFr1.6085/$ Australian dollar/U.S. dollar = A$1.8397/$ Australian dollar/Swiss franc = A$1.1533/SFr Ignoring transaction costs, does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, what steps would he take to make an arbitrage profit, and how much would he profit if he has $1,000,000 available for this purpose?
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/U.S. dollar = 1.5971...
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/U.S. dollar = 1.5971 CHF/USD Australian dollar/U.S. dollar = 1.8215 AUD/USD Australian dollar/Swiss franc = 1.1300 AUD/CHF Does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, what steps would he take to make an arbitrage profit, and how much would he profit if he has $1,000,000 USD?
You specialize in cross-rate arbitrage. You notice the following quotes: Singapore dollar/U.S. dollar (S$/S) spot rate...
You specialize in cross-rate arbitrage. You notice the following quotes: Singapore dollar/U.S. dollar (S$/S) spot rate = S$1.60/$ Canadian dollar/U.S. dollar (CD/$) spot rate = CD1.33/$ Singapore dollar/Canadian dollar (S$/CD) spot rate = S$1.15/CD Ignoring transaction costs: A) Do you have an arbitrage opportunity based on these quotes? B) If an arbitrage opportunity exists, what transactions would you undertake to secure the arbitrage profit? C) How much would your profit be if you have $1,000,000 available for this purpose?
Assume Alcoa has access to the following quotes: U.S. borrowing rate for 1 year = 9.5%...
Assume Alcoa has access to the following quotes: U.S. borrowing rate for 1 year = 9.5% U.S. deposit rate for 1 year = 8.7% French borrowing rate for 1 year = 11.3% French deposit rate for 1 year = 10.2% euro spot quote = $1.2363?78 euro 1 year forward quote = $1.2329?47 What value can Alcoa lock in for a receivable of euro3 million due in one year if it executes a money market hedge today?
1. CIA Assume the following interest rate and exchange rate quotes. You can borrow $1,000,000 or...
1. CIA Assume the following interest rate and exchange rate quotes. You can borrow $1,000,000 or its yen equivalent ¥101,000,000: Spot exchange rate: ¥101/$ 1-year forward rate: ¥100/$ 1-year $ interest rate: 1.50% 1-year ¥ interest rate: 0.70% . Use the rule of thumb to identify whether coved interest arbitrage is worthwhile. If yes, what is your strategy and how much is your profit (show the steps)? What market forces would occur to eliminate any further possibilities of covered interest...
James Clark is a foreign exchange trader with Citibank. He notices the following quotes. __________________________________________________________________________________________________ Spot...
James Clark is a foreign exchange trader with Citibank. He notices the following quotes. __________________________________________________________________________________________________ Spot exchange rate USD1.2051/SFr Six-month forward exchange rate USD1.1922/SFr Six-month $ interest rate 8% per year Six-month SFr interest rate 10% per year ___________________________________________________________________________________________________ Is there an arbitrage opportunity? If yes, determine the arbitrage profit in Swiss Francs. Assume that James Clark is authorized to work with $1,000,000. Input your answer without any currency information.
Part III: Interest Rate Parity and Covered Interest Arbitrage Assume the following information: Current spot rate...
Part III: Interest Rate Parity and Covered Interest Arbitrage Assume the following information: Current spot rate of Australian dollar = $.65 Forecasted spot rate of Australian dollar 1 year from now = $.69 1-year forward rate of Australian dollar = $.68 Annual interest rate for Australian dollar deposit = 5% Annual interest rate in the United States = 8% ​According to Interest Rate Parity, is the covered interest arbitrage feasible to U.S. investors and Australian investors? Please explain your answers...
1. Anna knows that she is fat, she should work out but she is often lazy...
1. Anna knows that she is fat, she should work out but she is often lazy and does not want to go to gym. What should Anna experiencing in her mind and why ? Explain 3 things Anna might be motivated to do because of it
Covered Interest Arbitrage. Assume the following information:                                 &nbsp
Covered Interest Arbitrage. Assume the following information:                                                                                                               Quoted Price                 Spot rate of Canadian dollar                                                  $.90                 90‑day forward rate of Canadian dollar                               $.88                 90‑day Canadian interest rate                                                4.4%                 90‑day U.S. interest rate                                                          1.6% Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1,000,000.) What market forces would occur to eliminate any further possibilities of covered interest arbitrage?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT