HOMEWORK1

Homework Chapter 6 Problems
1, 10, 12, 13, 15, 16, 17

1.Visiting Guatemala spot rate on the GTQ/€ cross rate GTQ 10.5799/€ Spot rate on €/reais cross rate €0.4462/R$
a. What’s the Brazilian reais/GTQ cross rate?
R/GTQ = GTQ/€ * €/R 10.5799*0.4462 =
ANSWER: = 4.72075 b. How many quetzals will Isaac get for his reais?
4.72075*4,500 = ANSWER: = 21,243.38 GTQ
10.Swiss Franc SF 12,000,000 can you make a profit from triangular arbitrage? Mt fuji bank ¥ 92.00/$ Mt rushmore bank SF 1.02/$ Mt blanc bank ¥ 90.00/SF SF TO ¥  $ TO ¥  ¥ to SF 12,000,000/1.02 = 11,764,705.8824  * 92 = 1,082,352,941.1765  / 90 = 12,026,143.7908 ANSWER: profit of 26,143.791

12. Citibank NYC 0.7551 and .7561/€ Barclays London 0.7545 and .7575/€ 1 million georgraphic arbitrage profit with 2 different exchange quotes. ANSWER 1,000,000/.7561 * .7545 = 997,883.878 LOSS 1,000,000/.7575 *.7551= 996,831.683 LOSS
13.Bs pre float fix Bs 778/$ to Bs 1025/$ a. The government devalued the Bs then it depreciated in the market b. The value changed by -24.098% 778-1025/1025 * 100 = -24.10%
15. Forward premium on dollar (Home) spot rate is € 1.330/$ three month FW is €1.3400/$ Indirect= spot-forward/forward 1.330-1.340/1.340 * 360/90 *100 = -2.9851 % Answer The dollar is selling at -2.985% discount over the euro. The euro is selling at premium over the dollar.
16. Forward discount on dollar spot rate $1.580/£ six month forward rate $1.5550/£ Direct= forward-spot/spot 1.555-1.58/1.58 * 360/180 *100 = -3.1646% Answer The pound is selling at a -3.165% discount over the dollar.
17. Cross rate between Mexican peso (Ps) and euro (€) spot rate Ps 12.45/$ & €0.755/$ ANSWER 12.45/.755= 16.49