Question
In: Finance
Bank A quotes ¥/$ = 187. Bank B quotes €/$ =0.8765. Bank C quotes ¥/€ =220....
Bank A quotes ¥/$ = 187. Bank B quotes €/$ =0.8765. Bank C quotes ¥/€ =220. Find the profit of a U.S. investor conducting a triangular arbitrage. Assume the investor has $1,000,000. Do not write any unit. Make sure to round your answers to the nearest 100th decimal points.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Bank A quotes ¥/$ = 187. Bank B quotes €/$ =( 1/1.15). What is the implied...
Bank A quotes ¥/$ = 187. Bank B quotes €/$ =( 1/1.15). What is
the implied ¥/€ cross exchange rate? Do not write any unit. Make
sure to round your answers to the nearest 100th decimal points.
Suppose you get the following quotes from Bank A and B on Euro. Bank...
Suppose you get the following quotes from Bank A and B on
Euro.
Bank
A
Bid Ask Bank
B Bid
Ask
USD1.2610/EU USD1.2630/EUR USD1.2640/EUR USD1.2660/EUR
You realize that you can use local arbitrage to take advantage
of the quotes difference. If you could put as much as $1 million
into the arbitrage, how much would be your arbitrage profits? To
get full credits, you need to include step by step instructions on
how to carry out this strategy.
Suppose Sumitomo Bank quotes the ¥/$ exchange rate as 110.30-.40 and Nomura Bank quotes 110.40-.50. Is...
Suppose Sumitomo Bank quotes the ¥/$ exchange rate as 110.30-.40
and Nomura Bank quotes 110.40-.50. Is there an arbitrage
opportunity? If so, explain how you would profit from these quotes.
If not, explain why not.
3. Citibank quotes NZ$1 = US$ 0.6624. Deutsche Bank quotes € 1 = US$1.1758. BNZ Bank...
3. Citibank quotes NZ$1 = US$ 0.6624. Deutsche Bank quotes € 1 =
US$1.1758. BNZ Bank quotes € 1 = NZ$1.7762.
a. If these quotes are simultaneously observed spot
rates, can you make an arbitrage profit? If so, calculate what
profit would you make if you started with N$ 1 million. Assume that
there are no transaction costs.
b. What would be your arbitrage profit if you were to
incur total transaction costs of 0.1% of the amount used for...
The Table below provides quotes from three Banks A,B, and C for the British Pound in...
The Table below provides quotes from three Banks A,B, and C for
the British Pound in U.S. dollars (A), the US dollar in Euros (B)
and the British Pound in Euros (C).
Bid price Ask price
A - USD/POUND 1.4871 1.4900
B - EURO/USD 0.8794 0.8852
C - EUR/POUND 1.3050 1.3062
(a) Calculate the appropriate EUR/POUND bid and -ask cross
exchange rates.
(b) Give your answers to (a), which currency is overvalued?
Explain your answer.
(c) Assuming no other trading...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese...
The following are quotes for several U.S. currency dealers.
Dealer
A
B
C
D
E
Japanese yen
109.97 - 110.01
110.01 - 110.05
109.98 - 110.00
109.99 - 110.02
110.02 - 110.06
Euro
1.1774 - 1.1776
1.1778 - 1.1781
1.1776 - 1.1778
1.1773 - 1.1775
1.1776 - 1.1778
Inter-dealer arbitrage
1a. Is there an arbitrage opportunity in Japanese yen? If so,
what exchanges should you make to take advantage of it? (Be
specific about which dealer you would select, what...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese...
The following are quotes for several U.S. currency dealers.
Dealer
A
B
C
D
E
Japanese yen
109.03 109.06
109.04 109.08
109.06 109.10
109.05 109.07
109.07 109.09
British pounds
1.3115 1.3119
1.3118 1.3120
1.3115 1.3118
1.3116 1.3117
1.3115 1.3118
Inter-dealer arbitrage
1a. Is there an arbitrage opportunity in Japanese yen? If so,
what exchanges should you make to take advantage of it? (Be
specific about which dealer you would select, what currency you
would buy from or sell to that...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese...
The following are quotes for several U.S. currency dealers.
Dealer
A
B
C
D
E
Japanese yen
108.98 - 109.00
109.02 - 109.06
108.99 - 109.02
109.01 - 109.05
108.97 - 109.01
British pounds
1.2374 - 1.2376
1.2376 - 1.2378
1.2378 - 1.2381
1.2376 - 1.2378
1.2373 - 1.2375
Inter-dealer arbitrage
1a. Is there an arbitrage opportunity in Japanese yen? If so,
what exchanges should you make to take advantage of it? (Be
specific about which dealer you would select,...
4. For liquidity purposes, a client keeps $100,000 in a bank account. The bank quotes a...
4. For liquidity purposes, a client keeps $100,000 in a bank
account. The bank quotes a stated annual interest rate of 7
percent. The bank’s service representative explains that the stated
rate is the rate one would earn if one were to cash out rather than
invest the interest payments. How much will your client have in his
account at the end of one year, assuming no additions or
withdrawals, using the following types of compounding?
A. Quarterly.
B. Monthly....
Using the pigeonhole theorem prove that any set of 220 10-character strings over the alphabet {a,b,c,d}...
Using the pigeonhole theorem prove that any set of 220
10-character strings over the alphabet {a,b,c,d} contains a pair of
anagrams.
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