A laptop computer costs €1,100 in Europe. The same computer costs GHS 1,540 in Ghana. If we assume that the law  of one price (LOP) holds, what is the spot exchange rate between the GHS and the euro?

Q: Imagine that you are importing pasta from Italy and reselling it in the United States. Your largest…

A: Forward rate agreement helps the buyer of a currency to buy the required currency at a future rate…

Q: In the spot market, 7.8 pesos can be exchanged for 1 U.S. dollar. A pairof headphones costs $15 in…

A: Given that;7.8 pesos can be exchanged for 1 U.S. dollar (USD).A pair of headphones costs $15 in the…

Q: A television costs $755 in the United States. The same television costs 634.5 euros. If purchasing…

A: Purchasing power parity: Purchasing power parity (PPP) is a concept which means that exchange rates…

Q: Today is 1 July and the spot exchange rate for AUD 1.00 = EUR 0.7000. You have purchased equipment…

A: Cost to be paid is determined by the exchange rate on the day of payment for the asset purchased.…

Q: Suppose Apple is selling computers in Australia for A$5,500 when the exchange rate is A$ = $0.68. If…

A: Given, Exchange rate = A$0.68 Exchange rate rises = A$0.75 Apple selling computers = A$5,500…

Q: In Munich, a hotdog costs €9 and in Boston a hot dog costs $1. If the exchange rate is $1.35/Euro.…

A: Cost per Munich hotdog = €9 Cost per US hotdog = $1 Exchange rate €1 = $1.35

Q: Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two…

A: Spot exchange rate for euros is $1.45/€ Spot exchange rate for Swiss francs is SFr1.65/$ Interest…

Q: A computer costs $ 1,300 in the United States. The same computer cost £1100 in Europe. Assuming that…

A: Computer Cost in USA = 1300 Computer Cost in Europe = 1100

Q: Let’s suppose that one US Dollar (USD) is currently selling for ten Mexican Pesos (MXN) on the…

A: Arbitrage is a financial technique that is used by traders in the financial markets to gain from the…

Q: A Big Mac costs SFr6.50 in Switzerland and US$5.74 in the United States. If current spot rate is…

A: An exchange rate is how much it costs to exchange one currency for another. Exchange rates fluctuate…

Q: The size of the peso contract is MXP500, 000, and the euro contract is on EUR125, 000. How much…

A: Given information: Size of Peso contract- MXP 500,000Size of Euro contract-EUR 125,000Change in…

Q: Suppose the spot exchange rate for the Hungarian Forint is HUF 209/USD. The infiation rate in the US…

A: The following information has been provided in the question: Spot exchange rate for Hungarian…

Q: Assume that the current price of a Big Mac in the United States today is $5.75.  Assume also that…

A: Big Mac in the United States = $5.75 Big Mac in Peru =10.50 sol USDPEN exchange rate = 3.7400 sol…

Q: Suppose that a chocolate bar costs 20 euros in France and 30 Singaporean dollars in Singapore. If…

A: The Real exchange rate refers to the weighted average exchange rate of the county currency in…

Q: he current market exchange rate is 2.2 francs per pound. Suppose you need to buy 6 pounds using…

A: In international business the exchange rate between the currencies play very important role in…

Q: Suppose exchange rate of Japanese yen in US $ is $.010, exchange rate of euro in US $ is $1.34, and…

A: When there are miss match in exchange rates, there is opportunity for triangular arbitrage profit.…

Q: A television costs $500 in the United States. The same television costs 312.5 euros. If purchasing…

A: Television cost in USA = 500 USD Television cost in Europe = 312.5 Euros

Q: A computer costs $660 in the United States. The same model costs €515 in France. If purchasing power…

A: The purchasing power parity is used to measure the absolute purchasing power of different currencies…

Q: The size of the peso contract is MXP500, 000, and the euro contract is on EUR125, 000. How much…

A: Futures contract are contracts set in future for with the obligation that the buyer to purchase the…

Q: A television costs $710 in the United States. The same television costs 628.5 euros. If purchasing…

A: The exchange rate at which currencies of two countries are exchanged immediately by the individual…

Q: A product sells for $1,000 in the U.S. If the exchange rate between $ and euro is $1 = 0.90 euro,…

A: Given data; Price of product in US = $1,000 Exchange rate between dollar and Euro = $1 = 0.90 euros

Q: If euros sell for $1.50 (U.S.) per euro, what should dollars sell for in eurosper dollar?

A: Direct Quote is a currency quote for foreign currency in per-unit terms of the domestic currency.…

Q: In the spot market, 7.3 pesos can be exchanged for 1 U.S. dollar. A pair of headphones costs $10 in…

A: Purchasing power parity: It is a method of comparing the purchasing power of the currencies by…

Q: A computer cost $1,300 in the United States. The same computer costs € 1,100 euros in Europe.…

A: The purchasing power parity( PPP) states that the cost of two identical goods will be the same in…

Q: Suppose that the current EUR/GBP rate is 0.6674 and the one-year forward exchange rate is 0.6748.…

A:

Q: Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% against…

A: Exchange rate is the value of one country’s currency in exchange of other country’s currency. If…

Q: On January 31, 2019 the exchange rate between the US dollar and the euro was 1.14 USD/EUR. At the…

A: Purchasing power parity is the metric that measures the absolute purchasing power of various…

Q: If the current exchange rate between the US and the UK is such that the current price of a pound is…

A: Given, 1 Pound = $1.20 US risk free rate = 2% UK risk free rate = 2.50%

Q: Carpet Baggers, Inc., is proposing to construct a new bagging plant in a country in Europe. The two…

A: Forward rate in units of currency 1 per one unit of currency 2 With spot rate (S in units of…

Q: If a Japanese car costs 1,500,000 yen, a similar American car costs $30,000, and a dollar can buy…

A: Base currency means the currency at the denominator position.

Q: A US based investor plans to invest $44,400 in Russia, where the interest rate is 6.65%. If the…

A: While investing in other country, first exchange rate shall be applied and then interest rate of…

Q: A television costs $750 in the United States. The same televisioncosts 637.5 euros. If purchasing…

A: A metric that helps in the comparison of the currencies of different countries by using the basket…

Q: Suppose a basket of goods in Paris costs €134 and the same basket purchased in New York costs $151.…

A: Given information: Cost of goods in Paris is €134 Cost of goods in New York is $151 Next year…

Q: A computer costs $560 in the United States. The same model costs 640 in France. If purchasing power…

A: Cost in dollar = $560 Cost in euros = Euro 640

Q: A selected bundle of goods costs £100 in the UK, and a similar bundle costs 1,200 krona (DKR) in…

A: Purchasing power parity (PPP) is a fundamental theory of exchange rate determination, which explains…

Q: In a recent e-news, you observe that the 6-month forward rate is $1.5031/Euro. Further, if you…

A: First of all lets find the spot rate of $/∈We have, CAD/∈=1.5513CAD/$=1.332Therefore from cross…

Q: one U.S. dollar buys 0.61 euro, how many dollars can you purchase for

A: Exchange rate is the value for 1 currency in terms of another currency.

Q: In New York, you can exchange $1 for €0.8575 or £0.7. Suppose that, in Berlin, £1 costs €1.1515. How…

A: Triangle arbitrage is a process in which the trader takes advantage of the difference in exchange…

Q: If today 1 US Dollar can buy 3 Korean Won and 1 Korean Won can buy equals 2 Philippine Peso, what is…

A: Exchange rate (ER) is a value at which two or more currencies are exchanged or traded. To make the…

Q: If a Big Mac costs 550 yen in Japan and the exchange rate of Japanese yen against US dollar is 100…

A: Purchasing power parity: As per this theory the exchange rate should reflect the purchasing power of…

Q: Assume that a UK family visits Spain every summer. Last year, the hotel room where they stayed was…

A: "Hi, Thanks for the Question. Since you asked multiple sub parts question, we will answer first…

Q: If today 1 US Dollar can buy 3 Korean Won and 1 Korean Won can buy equals 2 Philippine Peso, what is…

A: Cross exchange rate is used when there is no direct quotation available between two currencies.…

Q: You live in the United States and want to try to make some money through interest rate arbitrage…

A: Foreign Exchange Market is that under which we were trading in Foreign Currency we can make the…

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.