You have the following spot bid and ask rates between the Australian dollar (AUD), the Danish krone (DKK), and the Japanese yen (JPY): Bid Ask JPY 14.804/DKK JPY 14.952/DKK JPY 72.229/AUD JPY 72.955/AUD DKK 4.5722/AUD DKK 4.6182/AUD Which of the following is the closest to the arbitrage profit that is possible at these rates? O a. 4.11% O b. 3.70% O c. 4.60% d. 4.44% O e. 4.85%

You have the following spot bid and ask rates between the Australian dollar (AUD), the Danish krone (DKK), and the Japanese yen (JPY): Bid Ask JPY 14.804/DKK JPY 14.952/DKK JPY 72.229/AUD JPY 72.955/AUD DKK 4.5722/AUD DKK 4.6182/AUD Which of the following is the closest to the arbitrage profit that is possible at these rates? O a. 4.11% O b. 3.70% O c. 4.60% d. 4.44% O e. 4.85%

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 28QA

See similar textbooks

Similar questions

You have the following spot bid and ask rates between the Russian ruble (RUB), the Australian dollar (AUD), and the Mexican peso (MXN): Bid Ask MXN 0.2681/RUB MXN 0.2707/RUB AUD 0.0217/RUB AUD 0.0219/RUB MXN 12.884/AUD MXN 13.014/AUD Which of the following is the closest to the arbitrage profit that is possible at these rates? O a. 3.18% O b. 6.31% O. 2.65% O d. 3.62% O e 3.28%
Calculate the possible rate for buying SGD (Singapore Dollar) in exchange for selling JPY as well as the possible rate for selling SGD in exchange for buying JPY. Assume that the exchange rates (Bid – Offered rate) are quoted as follows: USD 1 = JPY 104.50-104.60, USD 1 = SGD 1.3485 – 1.3490.
Suppose the exchange rate is $1.71/€. Let r$ = 2%, r€ = 7%, u = 1.16, d = 0.78, and T = 2. Using a 2-step binomial tree, calculate the value of a $1.70-strike American call option on the euro. a.$0.1253 b. $0.1220 c. $0.1118 d. $0.1196 e. $0.1172
Suppose you long one Australian dollar call and one Australian dollarput with an exercise exchange rate of 0.75 (USD/AUD) and 0.65 (USD/AUD)respectively. The price of call and the price of put is USD0.04 and USD0.08,respectively.. (a) Compute the net call payo, net put payo and net combined payo.(b) Plot separately the Net Long call payo, the net long put payo and thenet combined payo.(c) Name and provide denition of the shape of the combined payo obtainedfrom part (b)?
The spot quote in New York for £ is $ 1.5912-1.6024 and for € is $ 1.1193-1.1226.Calculate the bid-ask spread percentage for euro PER pound sterling.
1. The spot market quotes the exchange rate of the GHS to a CADS as GHS 3.562 while the 90-day forward quotes it at GH3.425. Required: Calculate the annualized forward premium or discount. 2. Suppose bid price for £=GHS6.27, ask price = GHS6.316. Required: Calculate the bid/ask spread.
Calculate the cross rate between the EUR (the euro) and the INR (Indian rupee). Set it up as INR/EUR. The following is a list of available rates:USD 1.17/EURUSD 0.27/SAR SAR 4.38/EUR INR 64.4/USD Options are:EUR 17.388/INR EUR 0.0575/INR INR 75.348/EUR INR 17.388/EUR
Suppose you long one Australian dollar call and one Australian dollarput with an exercise exchange rate of 0.75 (USD/AUD) and 0.65 (USD/AUD)respectively. The price of call and the price of put is USD0.04 and USD0.08,respectively..Time Spot Exchange Rate (USD/AUD)0 0.351 0.402 0.453 0.504 0.555 0.606 0.657 0.708 0.759 0.8010 0.8511 0.9012 0.9513 1.0014 1.0515 1.10(a) Compute the net call payo, net put payo and net combined payo.(b) Plot separately the Net Long call payo, the net long put payo and thenet combined payo.(c) Name and provide denition of the shape of the combined payo obtainedfrom part (b)?
You observe the following quoted money market rates: Bid Ask Spot exchange rate AUD1.185/USD AUD1.189/USD 95-day Forward exchange rate AUD1.341/USD AUD1.349/USD 95-day USD interest rate 5.57% p.a. 6.38% p.a. 95-day AUD interest rate 7.71% p.a. 8.81% p.a. What will your profit (in USD) be 95 days from now if you borrow USD3 million today and invest in Australia and then convert back to USD? In your calculations assume 360 days per year. a. -USD 361,605.85 b. -USD 352,934.10 C. -USD 272,802.68 d. -USD322,300.31 e. None of the options in this question.
Suppose you have the following spot exchange rates: USD/AUD 0.5300 AUD/EUR 1.6428 USD/EUR 0.8782 a) Calculate the US dollar profit (per 1 USD), if any, on a three-point arbitrage. b) Calculate AUD profit (per 1 AUD), if any, on a three-point arbitrage. c) How can you explain the answers in (1) and (2)?
Suppose that the exchange rate is $0.92/Euro. The dollar-denominatedinterest rate is 4% and the euro-denominated interest rate is 3%.u = 1.2, d = 0.9, T = 0.75, n = 3, and K = $1.00.a. What is the price of a 9-month European put?b. What is the price of a 9-month American put?
Question Il: Suppose that the exchange rate is $0.92/e. Let rs = 4%, and re = 3%, u = 1.2, d = 0.9, T = 0.75, number of binomial periods = 3, and K = $1.00 Use Binomial Option pricing to answer the following two questions. (a) What is the price of a 9-month European put? (b) What is the price of a 9-month American put?