Posted: May 27th, 2015

International Finance

International Finance
Spot Exchange Rates  — Problems
Fin 310

1.    C$ 1 = $0.842 and €1 = $1.323.  What is C$/€?

2.    Suppose the direct quote for sterling in New York is 1.1115 – 54.  What is the direct quote for dollars in London?

3.    Suppose the spot quote on the Mexican Peso is $0.1332 – 47 and the spot quote on the Canadian Dollar is $0.8182 – 94.
a.    What is the direct spot quote for the Peso in Toronto?

b.    Compute the percentage bid-ask spread on the Peso and Can. Dollar.

4.    Suppose you observe the following direct spot quotations in New York and Toronto, respectively: 0.8000 – 50 and 1.2500 – 60.  What are the arbitrage profits per $1 million?

5.    Suppose the SF is quoted at 0.4442 – 86 in London and the pound sterling is quoted at 2.2523 – 42 in Bern.
a.    Is there a profitable arbitrage situation? Describe it.
b.    Compute the percentage bid-ask spreads on the pound and SF.

6.    Assuming no transaction costs.  Suppose £1 = $1.9411 in New York, $1 = €0.8756 in Paris and €1 = £0.6588 in London.  How could you take profitable advantage of these rates?