Question

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?

Answer 1

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.