Calculate the relative bid-ask spread for the following exchange rates. How much money you will lose if you convert 100,000 US dollar into the Canadian dollar and then convert the Canadian dollar back to the US dollar based on the quotes below?   Bid Price (USD/CAD) Ask Price (USD/CAD) Canadian dollar 0.7500 0.7520   A. None is correct.   B. Relative bid-ask spread: 0.266%; Loss: $200 USD   C. Relative bid-ask spread: 0.200%; Loss: $200 USD   D. Relative bid-ask spread: 0.266%; Lose: $266 USD

Q: The foreign exchange department of Bank of America has a bid quote on Canadian dollars (C$) of…

A: Spread % = Ask Price - Bid PriceAsk Price x 100

Q: Suppose the spot ask exchange rate, Sa($£), is $1.91 = £1.00 and the spot bid exchange rate, Sb($£),…

A: Ask exchange rate: It is the exchange rate at which dealers want to sell the currency. So, if you…

Q: Suppose you are a U.S. investor who is planning to invest $845,000 in Mexico. Your Mexican…

A: DATA GIVEN: Investment amount  = $845,000 Investment gain in Mexico = 10.6% Exchange rate: Original…

Q: If the U.S. economy experiences growth in the future, the property will be worth $50,000,000 and the…

A: Data given:: i)   Growth: Property will be worth $50,000,000 and the exchange course of 1 dollar…

Q: The following information is available to a Zambian trader: i. Percentage spread given for Zambian…

A: In any currency market, bid price can be defined as the price at which a dealer is willing to pay…

Q: Suppose that the Canadian dollar is worth A$1.08 and the United States dollar is worth A$1.35. (a)…

A:

Q: Let the NZ$-Euro exchange rate be 0.60 (1 NZD buys 0.60 Euro). Let the NZ price level (P) be 40 and…

A: Real exchange rate or RER is that exchange rate which is inflation adjusted i.e. rate is adjusted…

Q: What impact do Exchange Rate changes have on the Balance of Trade? Calculate the following scenario…

A:

Q: Suppose a U.S. investor wishes to invest in a British firm currently selling for £100 per share. The…

A: Initial investment in Dollars = $24,000 Initial Investment in pounds = £12,000 Share price = £100…

Q: 14.[EXCEL]Bid-ask spread: A foreign exchange dealer is willing to buy the Danish krone (DKr) at…

A: The Bid-Ask spread is computed as follows:

Q: ABC Company, an Australian firm, has a USD 385 million payable in one year. ABC is concerned that…

A: If the exchange rate increases then ABC company has to pay more Australian dollars because liability…

Q: Is there any violation of CIP? (b) Calculate the covered margin (going short on the AUD). (c)…

A: Here the spot rate is lower than the forward rate, so the EUR is selling at a premium.  The interest…

Q: HSL Inc., a U.S.-based MNC, imports goods from Canada, and HSL Inc. records its payables in Canadian…

A: To protect against the appreciation of the Canadian dollar I being the importer should apply the…

Q: 1)  Assume the following exchange rates are indirect quotes, what are the equivalent direct quotes…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Suppose you are a U.S. investor who is planning to invest $295,000 in Japan. You do so at a starting…

A: Given: Investment = $295,000 Spot exchange rate = 85.98¥/$ Interest rate = 8.70% Ending exchange…

Q: Suppose the Singapore dollar is worth A$1.03 and the Malaysian ringgit is worth A$0.33. (a) Define a…

A: A currency exchange rate is a financial rate at which the currency of one country can be exchanged…

Q: The current bid-offer quote between Australian dollar and the US dollar, AUD/USD, is 0.7201-0.7205,…

A: Here, Bid Offer Rate of AUD/USD is 0.7201-0.7205 Bid Offer Rate of GBP/USD is 1.3479-1.3483 Payment…

Q: As a US importer, we have the option of hedging with forwards, options, or not hedging. The size of…

A: Currency forward contract is an agreement wherein the certain amount of dollar is exchanged for the…

Q: Calculate the possible rate for buying GBP

A: Triangular arbitrage is the process where two related goods set the third price. The FX cross…

Q: You are provided with the following exchange rate quotations: American Terms Bank quotations British…

A: Bid on (€/£) = 1/ Ask ($/€) Ask ($/€) = $1.4742 Bid ($/£) = $1.9712

Q: Your company sells specialized electronic components to South Africa payable in South African Rands…

A: (a) Beta (β) for $/ZAR currently using probabilities = (0.20 * $0.0550 * ZAR 30,000) + (0.30 *…

Q: ange rates between the USD and CAD, AUD, and BRL respectively are 1.20, 0.90, and 1.40 respectively…

A: Real effective exchange rate is based on the overall exchange rate based on trade between the…

Q: The exchange rates in New York for $1 are Can$1.0941 or 0.7257 pounds. In Toronto, Can$1 will buy…

A: Arbitrage is practice of immediate buying and selling of assets including equities, bonds,…

Q: Brandt Corp. (a U.S.-based company) sold parts to a South Korean customer on December 1, 2020, with…

A: The transactions which involve exchange rate mechanism can be hedged by using the various derivative…

Q: Suppose you have a 1,200,000 US dollar payable coming due in June and that the spot today is .98…

A: A portfolio is a collection of different kinds of stock. A well diversified portfolio should be…

Q: a) Suppose you are a Bangladesh Citizen who is planning to go to USA. Current Exchange Rate is Tk…

A: Since you have asked multiple questions , we will solve the first question for you. Please ask the…

Q: Suppose you have developed a hairbrained scheme to purchase art, mint a NFT, and then sell it for a…

A: Exchange rate: It is the rate or price at which two currencies are exchanged.

Q: Calculate the dollar-denominated returns for each scenario.

A: CASE:1 Current price of the share = 60 per share Total investment                = 6000 Exchange…

Q: Given the following information: Exchange rate - Canadian dollar 0.665 per DM (spot) 1 Canadian…

A: Arbitrage is a strategy that uses the difference in the price of the same commodity in different…

Q: An U.S. firm requires C$230,000 in 90 days to pay the imports from Canada. To avoid currency…

A: Whenever there is an involvement of foreign currency in the transaction, it results in foreign…

Q: ABC Bank quotes the following for the British pound and the New Zealand dollar:     Quoted Bid…

A: Given, Pound = $1.61/$1.62 NZ$ =$0.55/0.56 Pound = NZ$ 2.95/ 2.96

Q: What is the External PPP of 33876 OMR at Kuwait, if price level in Kuwait is 10,000 KWD and exchange…

A: in this we have to convert Kuwait prices into OMR both should be in same currency to get External…

Q: Assume you have $1,000 to invest in a triangular arbitrage transaction, what is your best course of…

A: Note: It is a situation where multiple questions have been asked, so we are allowed to solve the…

Q: ABC Company wants to possibly expand its plant in Europe. The current spot exchange rate is for Euro…

A: Cash flows are the cash generated from the operation of the business organisation. In other words,…

Q: Complete the following cross-rate table:   USD YEN EURO POUND MEXICAN PESO USD       1.5625   YEN…

A: Triangular Arbitrage opportunities exist in the Foreign exchange trading market. It is the…

Q: Today you notice the following exchange rate quotation: $1 = 3 Argentine pesos 1 Argentine pesos =…

A: The cross exchange rates can be used to determine the amount of in currency in terms of another.

Q: Dalia Ltd, a UK exporter, expects a receipt of 1.7m Canadian dollars (C$) for sure in one year from…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Suppose a U.S. investor wishes to invest in a British firm currently selling for £24 per share. The…

A: In International Investments, exchange rate is a significant factor which is required to be analyzed…

Q: We have 100 million South African rands that are payable in one year (we have to pay it to a South…

A: Concept. Forward contract , options are various techniques used for hedging.

Q: Data from The Economist BigMac index from January 2022 shows that the local price of a Big Mac in…

A: According to purchase power parity the exchange rate and purchase power should be related and this…

Q: Suppose a U.S. investor wishes to invest in a British firm currently selling for £60 per share. The…

A: Total amount for Investment in $ terms = $6,000 Total amount for Investment in Pounds term =$6000 /…

Q: dollars

A: Introduction: The term exchange rate can be defined as a rate at which one currency will be…

Q: Suppose the spot exchange rate for the U.S. dollar is CAD$1.01 and the six-month forward rate is…

A: a.  U.S. dollar worth more than Canadian dollar as 1USD=CAD$1.01

Q: A call option allows the holder to buy USD100,000 at an exercise exchange rate of 1.8000 (AUD/USD).…

A: Formula to calculate Net payoff = (max(St - X, 0) - Premium paid) * Number of USD to be bought St =…

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.