1. Please provide your name. (Type: Fill In The Blank Survey)___________
2. The current exchange rate is Â£1.00 = $2.00. Bank America and Bank Britannia have a correspondent banking relationship. If an American account holder at Bank America asks the bank to make a payment of Â£45,000 to a British company using the funds the American has in his dollar-denominated account, what are the changes to the partiesâ€™ banking accounts? Assume the British company banks with BankBritannia.
(a)The American account holder’s account at Bank America will fall by $90,000.
(b)Bank America’s account at Bank Britannia will fall by Â£45,000.
(c)The British company’s account at Bank Britannia will rise by Â£45,000.
(d)All of the above
3. It is common practice among currency traders worldwide to both price and trade currencies against theU.S. dollar. Consider a currency dealer who makes a market in 5 currencies against the dollar. If he were to supply quotes for each currency in terms of all of the others, how many quotes would he have to provide?
(e)None of the above
4. Suppose the spot ask exchange rate, Sa($|Â£), is $1.90 = Â£1.00 and the spot bid exchange rate, Sb($|Â£), is$1.89 = Â£1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be â€œeatenâ€ by the bid-ask spread?
5. Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of â‚¬512,100. The U.S. importer will contact his U.S. bank (where of course he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes asâ‚¬1.0242/$1.00. The importer accepts this price, so his bank will ____________ the importer’s account in the amount of ____________.
6. In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/Â£ bid-ask quote of $1.9072-$1.9077. The â€œbig figureâ€assumed to be known to all traders is _____.
7. The dollar-euro exchange rate is $1.25 = â‚¬1.00 and the dollar-yen exchange rate is Â¥100 = $1.00. What is the euro-yen cross rate?
(a)Â¥125 = â‚¬1.00
(b)Â¥1.00 = â‚¬125
(c)Â¥1.00 = â‚¬0.80
(d)None of the above
8. Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = â‚¬1.00 and the dollar-pound exchange rate is quoted at?
(a) $2.00 = Â£1.00.
9. Suppose a bank customer with â‚¬1,000,000 wishes to trade out of euro and into Japanese yen. The dollar-euro exchange rate is quoted as $1.60 = â‚¬1.00 and the dollar-yen exchange rate is quoted at $1.00= Â¥120. How many yen will the customer get?
10.Suppose you observe the following exchange rates: â‚¬1 = $.85; Â£1 = $1.60; and â‚¬2.00 = Â£1.00. Starting with $1,000,000, how can you make money?
(a) Exchange $1m for Â£625,000 at Â£1 = $1.60. Buy â‚¬1,250,000 at â‚¬2 = Â£1.00; trade for $1,062,500at â‚¬1 = $.85.
(b) Start with dollars, exchange for euros at â‚¬1 = $.85; exchange for pounds at â‚¬2.00 = Â£1.00;exchange for dollars at Â£1 = $1.60.
(c) Start with euros; exchange for pounds; exchange for dollars; exchange for Euros.
(d) No arbitrage profit is possible. Get Finance Help Today