Quotes for the Dollar against the British pound: 0.7855 – 0.7925 Quotes for the British pound...

Quotes for the Dollar against the British pound: 0.7855 – 0.7925 Quotes for the British pound against the dollar: 1.4475- 1.4755.

1) Which market would you use of you want to BUY dollars?

2) Which market would you use if you want to SELL dollars?

Expert Solution

First let's convert the rates to make them comparable:

Bid is the price at which the dealer buys and you sells while ask is the price at which the dealer sells and you buy.

At 0.7855 the Dealer buys $1 and you sell it
- So this is a bid rate for $
- When dealer buys $ he sells Pound so it is also the ask for Pounds
- If 0.7855 pounds buy $1 so how many $ are needed to buy 1 pound
  - 1/0.7855 = $1.2731
  - So 1 pound will get $1.2731
At 0.7925 the Dealer sells $1 and you buy it
- So this is a ask rate for $
- When dealer sells $ he buys Pound so it is also the bid for Pounds
- If 0.7925 pounds buy $1 so how many $ are needed to buy 1 pound
  - 1/0.7925 = $1.2618
  - So 1 pound will get $1.2618
So the Bid ask quote is 1.2618-1.2731
While the rate in the other market is 1.4475- 1.4755.
- This is the rate for pounds.
- the dealer buys pounds for 1.4475 and the dealer sells the pound for 1.4755
- When the dealer buys pound he sells $ and when he sells pound he will buy $
It is better to buy dollar and sell pound so the dealer will buy pound and sell the dollar
- So we have to look at the bid rate of 0.7855
- The $ rate will be 1.2731
- So you sell the $ at 1.4755 and the dealer buys $

jeff jeffy answered 1 year ago

If the British pound depreciates against the U.S. dollar Select one: A. British consumers lose by...

If the British pound depreciates against the U.S. dollar Select one: A. British consumers lose by a decrease in the pound price of U.S. exports to Britain. B. British consumers gain by a decrease in the pound price of U.S. exports to Britain. C. British businesses gain by an increase in the dollar price of exports to the United States. D. U.S. consumers win by a decrease in the dollar price of British exports to the United States.

If the British pound depreciates against the U.S. dollar Select one: British businesses gain by an...

If the British pound depreciates against the U.S. dollar Select one: British businesses gain by an increase in the dollar price of British exports to the United States. British consumers lose by an increase in the pound price of U.S. exports to Britain. British consumers gain by a decrease in the pound price of U.S. exports to Britain. U.S. consumers lose by an increase in the dollar price of British exports to the United States.

The New Zealand dollar to U.S. dollar exchange rate is 1.34 , and the British pound...

The New Zealand dollar to U.S. dollar exchange rate is 1.34 , and the British pound to U.S. dollar exchange rate is .63. If you find that the British pound to New Zealand dollar were trading at .51 , what would be the riskless profit per U.S. dollar invested?

2. Consider the following quotes: Yen per Pound: 256 Yen per dollar: 180 Dollar per pound:...

2. Consider the following quotes: Yen per Pound: 256 Yen per dollar: 180 Dollar per pound: 1.5 Suppose 1 million dollars invested Is there any possibility of triangular arbitrage? Why or why not? If yes, what is the arbitrage profit? Use $1,000,000. Please show all work will rate 5 stars thank you!

what are the british pound vs U.S dollar advantages and disadvantages?

If the British pound and Euro are both appreciating relative to the dollar, how does this...

If the British pound and Euro are both appreciating relative to the dollar, how does this impact exports and imports, AD and GDP? What should the Fed. due to respond?

Which of the following causes the dollar to depreciate relative to the British pound? an increase...

Which of the following causes the dollar to depreciate relative to the British pound? an increase in the supply of pounds a decrease in the supply of dollars a decrease in the demand for dollars an increase in the demand for pounds

The inflation rates in the British pound and the Australian dollar are 2% and 8% respectively....

The inflation rates in the British pound and the Australian dollar are 2% and 8% respectively. What should the Sex /Forward ER be, if the Spot ER is BP/ A$ .1? Describe the concept of purchasing power.

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 current dollar−pound exchange rate is $2 per British pound. A U.S. basket that costs $100...

The current dollar−pound exchange rate is $2 per British pound. A U.S. basket that costs $100 would cost $140 in the United Kingdom. For the next year, the U.S. Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep U.K. inflation at 3%. The speed of convergence to absolute PPP is 15% per year. 1. (Scenario: Monetary Approach in the Long-run) What is the current U.S. real exchange rate with the United...

Question