USD/TRY = 7,3822 EUR / TRY = 8,7550 GBP/USD = 1,3341 GBP/TRY = 9,8886 USD/NZD =...

USD/TRY = 7,3822

EUR / TRY = 8,7550

GBP/USD = 1,3341

GBP/TRY = 9,8886

USD/NZD = 1,4802

EUR / JPY = 125,7911

İUSD=%0,25

İTRY=%8,25

İEUR=%0,50

What should be the EUR / TRY exchange rate that will not allow arbitrage after 5 months?

Solutions

Expert Solution

Solution:

When an individual sells goods and services in a foreign currency, a foreign exchange benefit / loss takes place. When translated to the seller's local currency, the value of the foreign currency is different depending on the exchange rate. The seller would have made a foreign currency benefit as the currency value rises after conversion.

However, the seller has sustained a foreign exchange loss if the currency value is declined after the conversion. If the actual exchange rate can not be calculated at the precise moment the transaction is accepted, the next exchange rate available will be used for the conversion calculation.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Forex quotes: 1.1837 EUR/USD 0.7231 EUR/GBP 1.6388 GBP/USD If Mary was given 10,000 euros will she...

Forex quotes: 1.1837 EUR/USD 0.7231 EUR/GBP 1.6388 GBP/USD If Mary was given 10,000 euros will she be able to earn some profit for her institution by playing the above FOREX quotes:If so, compute the profit. What is such type of profit called?

Suppose that the current spot exchange rate of the EUR is USD 1.25 / EUR and...

Suppose that the current spot exchange rate of the EUR is USD 1.25 / EUR and the 3-month forward exchange rate is USD $1.10 / EUR. The 3-month interest rate is 4% per annum in the US and 3% per annum in Germany. Assume that you can borrow EUR 1,000,000 or USD 1,000,000. Determine whether interest rate parity is currently holding. If IRP is no holding, how would you carry out covered interest arbitrage (CIA)? Show all the steps and...

Suppose that the current spot exchange rate of the EUR is USD 1.15 / EUR and...

Suppose that the current spot exchange rate of the EUR is USD 1.15 / EUR and the 3-month forward exchange rate is USD $1.10 / EUR. The 3-month interest rate is 6% per annum in the US and 4% per annum in Germany. Assume that you can borrow EUR 1,000,000 or USD 1,150,000. 1. Determine whether interest rate parity is currently holding. 2. If IRP is no holding, how would you carry out covered interest arbitrage (CIA)? Show all the...

Suppose that the current spot exchange rate of the EUR is USD 1.15 / EUR and...

S(EUR/USD) = EUR/USD 1.1 Annual interest rate in Euro zone = 0.5% Annual interest rate in...

S(EUR/USD) = EUR/USD 1.1 Annual interest rate in Euro zone = 0.5% Annual interest rate in US = 2% Bank A offers: F(EUR/USD) = EUR/USD 1.2. Check for the presence of an arbitrage opportunity (Covered interest

Consider the following data:- GBP/USD spot : 1.7500/10 GBP/USD 3m fwd : 1.7380/1.7400 3months dollar interest...

Consider the following data:- GBP/USD spot : 1.7500/10 GBP/USD 3m fwd : 1.7380/1.7400 3months dollar interest rate = 8.1% 3 months pound sterling interest rate = 11% A British firm has a 3 month dollar receivable of USD 500,000. The 2 options available to the firm are:- Cover the receivable in the forward market Borrow in dollars today and convert it to pounds in the spot market. Invest the pounds in the local market for 3 months. The receivables in...

Dealer A quotes 1.5053 – 62 for the EUR/NZD exchange rate to company XYB. Calculate :...

Dealer A quotes 1.5053 – 62 for the EUR/NZD exchange rate to company XYB. Calculate : (i) the price at which A is willing to buy the EUR (ii) the price at which company XYB can buy the NZD (iii) the price at which A is willing to sell the EUR (iv) the price at which company XYB can sell the NZD (v) the dealer’s spread (vi) Dealer A also quotes EUR/USD 1.1832 – 700. Calculate USD/NZD.

1) At Bank X, the bid rate of a NZD is USD 0.630 and the ask...

1) At Bank X, the bid rate of a NZD is USD 0.630 and the ask rate is USD 0.635. However, at Bank Y, the bid rate of the NZD is USD 0.628 and the ask rate is USD 0.631. What would be your profit if you use USD 1,000,000 and try to execute locational arbitrage? A) + USD 11,146.50 B) + USD 1,587.30 C) - USD 1,584.79 D) - USD 11,023.62 2) At Bank X, the bid rate of...

Foreign Exchange USD/NOK (Norway) 10.30 USD/HKD (Hong Kong) 7.75 NZD/USD (New Zealand) 0.62 USD/KRW (Korea) 1210...

Foreign Exchange USD/NOK (Norway) 10.30 USD/HKD (Hong Kong) 7.75 NZD/USD (New Zealand) 0.62 USD/KRW (Korea) 1210 Use the above currency exchange rates for problems 1-3 below. 1. If you convert 100 Norwegian Krona (NOK) into New Zealand Dollars (NZD), how many NZD would you have? (3) 2. How many Norwegian Krona (NOK) does it take to buy 100 Hong Kong Dollars? (3) 3. One ounce of gold costs $1700 US. One ounce of gold also costs 2,000,000 Korean Won (KRW)....

Assume the one-year interest rate is 8% on GBP and 1% on EUR. At the same...

Assume the one-year interest rate is 8% on GBP and 1% on EUR. At the same time, inflation is running at an annual rate of 3% in Germany and 1.5% in UK. The current spot rate is EUR/GBP 1.17. a) If the one-year forward premium of the euro against the pound is 8%, is there an arbitrage opportunity? Explain. b) If there is an arbitrage opportunity, will the British or the German investor be able to make a profit? How...

Subjects