Question 2 You are a currency trader. You started the day with cash on hand of...

Question 2

You are a currency trader. You started the day with cash on hand of 1 million US Dollars and executed the following transactions throughout the day:

Bought EUR 150,000 at a rate of USD/ EUR spot 0.82/0.83
Bought GBP 100,000 at a rate of USD/ GBP spot 0.70/0.71
Bought EGP 2,000,000 at a rate of USD/ EGP 17.83/17.84
Bought 120,000 SAR at a rate of USD/ SAR 3.78/3.8
Bought 200,000 AED against EGP at a rate of AED/EGP 4.92/4.93
Bought 10,000 AUD against SAR at a rate of AUD/SAR 2.95/2.96
Bought 10,000,000 Yen against EUR at a rate of EUR/JPY 132/133
Bought 100,000 CAD against GBP at a rate of CAD/GBP 0.60/0.61

At the end of the day, you converted all currencies you have on hand into USD. The quoted exchange rates at end of day were:

EUR/USD: 1.23/1.25 USD/GBP: 0.71/0.72 USD/EGP: 17.63/17.68 USD/SAR: 3.76/3.77

USD/AED: 3.67/3.68 USD/AUD: 1.38/1.39 USD/JPY: 113/114 USD/CAD: 1.3/1.31.

Required:

Calculate your total end of day profit / loss in US Dollars. (Show all steps & calculations)

Expert Solution

After the calculations shown in photographs, the available USD is 982712.6. Hence there is a loss of approx 17287 USD in the above transactions.

jeff jeffy answered 1 year ago

You work as a currency trader at the Big Time Bank and specialise in trading the...

You work as a currency trader at the Big Time Bank and specialise in trading the AUD USD. The current spot rate is USD AUD 0.678 and you have forecast a rate of USD AUD 0.6915 in 90 days. The borrowing and lending rates in Australia and the US are: Currency Lending rate Borrowing rate US dollar 2.3% 2.5% Australian dollar 1.4% 1.8% You will speculate on the change in the exchange rate and you have the authority to borrow...

Suppose you are a currency trader and you have the following information: Spot rate: $1.30/£ The...

Suppose you are a currency trader and you have the following information: Spot rate: $1.30/£ The one-year interest rate for the U.S. dollar: 3% The one-year interest rate for the pound: 2% 1. Please calculate the one-year forward rate based on the Interest Rate Parity. 2. If the actual one-year forward is quoted at $1.28/£, do you find a covered interest arbitrage opportunity? Please explain. 3. If there exists a covered interest arbitrage opportunity, then show all the necessary procedures...

You are contemplating becoming a fx trader. You want to speculate on a particular currency (Canadian...

You are contemplating becoming a fx trader. You want to speculate on a particular currency (Canadian Dollar). What is a better choice for speculating futures contracts or options contracts?

A Foreign currency trader at the bank’s FX desk calls to inform you that Bank of...

A Foreign currency trader at the bank’s FX desk calls to inform you that Bank of America is quoting $1.12/€1, and Citibank is offering $1.28/£1. The trader also noticed that Credit Agricole is making market in pound sterling and Euro at €1.18/£1. a. What is the implied €/£ cross-rate for the two European currencies? Show this trader how you would use $1 million to conduct a triangular arbitrage to profit from the deviation (if any) of the implied cross rate...

Interest Rate Parity and Covered Interest Arbitrage Suppose you are a currency trader and you have...

Interest Rate Parity and Covered Interest Arbitrage Suppose you are a currency trader and you have the following information: Spot rate: $1.30/£ One year interest rate for the U.S. dollar: 3% One year interest rate for the pound: 2% Please calculate the one-year forward rate based on the Interest Rate Parity. 2. If the actual one-year forward is quoted at $1.28/£, do you find a covered interest arbitrage opportunity? Please explain. 3. If there exists a covered interest...

Say you are a currency trader. You know from your Bloomberg database terminal that the spot...

Say you are a currency trader. You know from your Bloomberg database terminal that the spot rate is US$0.8545 = NZ$1, NZ Treasury Bills offer a return of 5 percent per anum, US Treasury Bills offer 2 percent per anum, and the one year forward rate is US$0.8224. NewZealand dollar is domsetic currency. a) Say you are trying to work out if the current forward rate to see if the markets are in equilibrium, or they are in disequilibrium and...

You just started this MHA. You are looking forward to the day that you are done...

You just started this MHA. You are looking forward to the day that you are done and gainfully employed. You really liked this new Honda Accord that just came out (because one of your professors used to work for Honda). Today the cost of that car is $32,000. You are smart and you know you need to put money away today – so that in FIVE years, you can purchase it. You are going to put your money away in...

What is the 6% day trader rule and an example of it in a real life...

What is the 6% day trader rule and an example of it in a real life scenario?

The Assistant Manager meets with the Manager every day at 2 p.m., and hand delivers each...

The Assistant Manager meets with the Manager every day at 2 p.m., and hand delivers each reviewed complaint form to the Manager and informs the Manager about any complaints that need additional review by the Manager. The rental company’s Manager reviews the complaint form only if the Assistant Manager recommends such a review. This additional review is completed by the Manager by end of the next business day and the Manager’s reviews are shared with the Assistant Manager. (Paragraph 3)....

A currency trader can borrow the equivalent of $1,000,000 (in either $s or €s) for one...

A currency trader can borrow the equivalent of $1,000,000 (in either $s or €s) for one year. The one-year $US interest rate is 2%; the one-year Euro interest rate is 6%. The spot rate is $/€ 1.25 and the one-year forward rate is $/€ 1.20. How much profit can be realized via covered interest arbitrage?

Question