You have the following financial market information. You also have 1.88 million Australian dollar (A$) or 3.14 million Thai baht (THB) to make a profit due to covered interest arbitrage (CIA). Calculate the profit in A$ or THB if the CIA opportunity exists in the market. (enter the whole number without sign and symbol) Bid price Ask price A$0.0464 A$0.0682 THB spot rate THB one-year forward rate A$0.0425 A$0.0634 A$ spot rate THB22.4037 THB24.2606 A$ one-year forward rate THB27.6528 THB29.6897 Deposit rate Loan rate Interest rate on A$ 2.70% 4.58% Interest rate on THB 6.98% 8.23%
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- Assume the bid rate of an Yen dollar is $ 1.8 while the ask rate is $ 3.5 at Arab Bank.Assume the bid rate of an Yen dollar is $3.4 while the ask rate is $5.7 at Palestine Bank. Given this information, what would be your gain if you use $8876.7 and execute locational arbitrage? =8876.713.5^ * 3.4b =8876.7/5.7^ * 3.5c =8876.7/3.4^ * 1.8d = 8876.7 /3.5^ * 5.7You have the following financial market information. You also have 1.34 million Australian dollar (A$) or 3.91 million Thai baht (THB) to make a profit due to covered interest arbitrage (CIA). Calculate the profit in A$ or THB if the CIA opportunity exists in the market. (enter the whole number without sign and symbol) THB spot rate THB one-year forward rate A$ spot rate A$ one-year forward rate Interest rate on A$ Interest rate on THB Bid price A$0.0408 A$0.0491 THB22.0891 THB27.5141 Deposit rate 2.28% 6.88% Ask price A$0.0606 A$0.0663 THB24.4134 THB29.8197 Loan rate 4.46% 8.77% Answer:The current spot rates are: GBP (S/E) EUR (S/E) JPY (¥/$) Bid 1.115 1.025 102 13,000,000.35 You owe a customer in England £1 and you are owed 86. You currently have $13 million in the bank. How much will you have in the bank after both transactions are finished? Ask 1.168 1055 127 13,324,862.7451 margin of error +/-10
- You observe the following quotes for the USD/AUD in the spot market from two banks:Bank of Sydney /Bank of New YorkBid Ask/ Bid Ask0.71711 0.71715 /0.71708 0.71715Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculatethe potential profit if you are able to use AUD 25,000. If not, explain why arbitrage is not possible?(b) You observe the following quotes for the GBP /AUD in the spot market from two banks:Bank of Melbourne/ Bank of LondonBid Ask/ Bid Ask0.5458 0.5459 /0.5514 0.5515Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculatethe potential profit if you are able to use GBP 50,000. If not, explain why arbitrage is not possible?c) You observe the following quotes for the EUR / USD in the spot market from two banks:Deutsche Bank/ Bank of AmericaBid Ask /Bid Ask1.18102 1.18102 /1.18094 1.18100Do these quotes imply the possibility of earning a profit by using locational arbitrage? If…a) You observe the following quotes for the USD/AUD in the spot market from two banks: Bank of Sydney Bank of New York Bid Ask Bid Ask 0.71711 0.71715 0.71708 0.71715 Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculate the potential profit if you are able to use AUD 25,000. If not, explain why arbitrage is not possible? (b) You observe the following quotes for the GBP /AUD in the spot market from two banks: Bank of Melbourne Bank of London Bid Ask Bid Ask 0.5458 0.5459 0.5514 0.5515 Do these quotes imply the possibility of earning a profit by using locational arbitrage? If so, calculate the potential profit if you are able to use GBP 50,000. If not, explain why arbitrage is not possible? c) You observe the following quotes for the EUR / USD in the spot market from two banks: Deutsche Bank Bank of America Bid Ask Bid Ask 1.18102 1.18102 1.18094 1.18100 Do these quotes imply the…Assume the following information: Bid price of Singapore dollar Ask price of Singapore dollar Marcus Bank $0.748 $0.750 $4,000.00. $5,347.59. $2,000.00. $2,666.67. Truist Bank $0.752 $0.753 Given this information, is locational arbitrage possible? If so,compute the profit from this arbitrage if you had $1,000,000 to use.
- Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 0.173687 ETFCDA : E(r)= 0.073763 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 Answer the following questions using Excel: Determine your optimal asset allocation among ETFUS , ETFCDA , and T-bill, in percentage and in dollar amounts. Also submit an Excel file to show your…Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 0.173687 ETFCDA : E(r)= 0.073763 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 Answer the following questions using Excel: What is the optimal portfolio of ETFUS and ETFCDA? Also submit an Excel file to show your work.Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 0.173687 ETFCDA : E(r)= 0.073763 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 Answer the following questions using Excel: Draw the opportunity set offered by these two securities (with increments of 0.01 in weight). Hint: In Excel, calculate the portfolio expected return and…
- Citibank quotes NZ$1 = US$ 0.6624. Deutsche Bank quotes € 1 = US$1.1758.BNZ Bank quotes€ 1 = NZ$1.7762.a. If these quotes are simultaneously observed spot rates, can you make an arbitrage profit? Ifso, calculate what profit would you make if you started with NZ$ 1 million. Assume thatthere are no transaction costs. b. What would be your arbitrage profit if you were to incur total transaction costs of 0.1% of theamount used for conversions?Consider the following situation. It costs $1.2900 to purchase £1 for immediate delivery. UK interest rates are 0.75% p.a. US interest rates are 1.5% p.a. What must be the 1 year forward rate at which you can purchase £ with $? Assume that there is no default risk, no transaction costs, no bid-ask spreads, etc. Provide your answer to 4 decimatplaces, for example, if you think the answer is 1.2900 $/£, enter '1.2900' Answer:Assume the bid rate of a Canada dollar is A$.271 while the ask rate is A$.273 at Bank A. Assume the bid rate of the Canada dollar is A$.265 while the ask rate is A$.266 at Bank B. Given this information, what would be your gain if you use A$2,500,000 and execute locational arbitrage? That is, how much will you end up with over and above the A$2,500,000 you started with? Group of answer choices A$ 46,992 A$ 65,789 - A$ 65,789 A$ 18,315 - A$ 46,992