The current bid-offer quote between Australian dollar and the US dollar, AUD/USD, is 0.7201-0.7205, while the quote between British pound and the US dollar, GBP/USD is 1.3479-1.3483. If an Australian firm needs to pay 1 million British pound for its import, how much Australian dollars does it need for the payment? Briefly explain your answer.

Q: The exchange rate between the British pound and the Australian dollar (GBP/AUD) is 0.4220, it means…

A: Exchange rate between the British pound and the Australian dollar (GBP/AUD) is 0.4220

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: The current and forward rates between the Japanese yen and the US$ are $o.110 and $0.108%…

A: When the forward trade costs less than a spot trade, there is a forward discount.  Return on a…

Q: If the exchange rate for Canadian and U.S. dollars is 0.92777 to 1, this implies that 13 Canadian…

A: Value of 1 Canadian dollar in US dollar = 1/0.92777 = 1.07785334727

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

A: Hedging: Multinational companies with receivables and payables in several currencies seek to hedge…

Q: An Australian firm asks the bank for an AS/SFr quote because it received SFr and wants to change it…

A: Calculate the ask rate of US$/SFR by dividing 1 by the bid rate of SFR/US$ which is 1.4950. Thus,…

Q: An Australian firm asks the bank for a SFr/AS quote because it received SFr and wants to change it…

A: Calculate the bid rate of US$/A$ by dividing 1 by the ask rate of A$/US$ which is 1.5250. Thus, the…

Q: The $/€ exchange rate is €1 = $1.45, and the €/SFr exchange rate is SFr1 = €0.71. What is the SFr/$…

A: 1) To find the  SFr/$  Exchange rate, we need to find the cross rate,   SFr/$      =  €/$ *   SFr/€…

Q: In the spot market, P1 = 100 USD, 1 USD = 0.95 Yen, and 1 Yen = 5.50 British Pound. What is the…

A: The cross rate functions can be used to calculate the exchange rate of Peso and Pound

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

A:

Q: Assume a U.S.-based subsidiary wants to raise $5 million by issuing a bond denominated in Australian…

A: Number of bonds to be issued = Amount to be raised / (Exchange rate * Face value of bond)

Q: Suppose Dassie Bank quoted the exchange rate of Singapore dollar in US$ at $0.60, the pound rate in…

A: Foreign currency exchange rates are rates used for exchange of one currency into another currency.…

Q: Suppose Dassie Bank quoted the exchange rate of Singapore dollar in US$ at $0.60, the pound rate in…

A: Currency arbitrage is a strategy that is used by investors to exploit the differences in exchange…

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

A:

Q: Suppose you long one Australian dollar call and one Australian dollar put with an exercise exchange…

A: a). Computation of the net call pay, net put pay and net combined pay:- Given Information:- Call…

Q: If the current USDJPY exchange rate is 135.00 Japanese yen per U.S. dollar, the price of a Big Mac…

A: The law of one price is a concept which will advocate for uniform price across different nation for…

Q: Calculate the relative bid-ask spread for the following exchange rates. How much money you will lose…

A: Currency is the medium of a country through which goods and services are exchanged or traded within…

Q: What are spot rates and forward rates? Suppose you open the newspaper today and observe the…

A: Answer 1:The correct answer is “discount” in the forward market.Justification: This is because of…

Q: Blur Ltd, a UK importer, expects to make a payment of 1.8m Australian dollars (A$) for sure in one…

A: Hedging is a strategy to reduce the risk of price movement by creating an off-setting position in…

Q: Aa An exchange rate is the price of one country's currency expressed in another country's currency.…

A: Exchage rate: The value of the currency of one country in the terms of the current of another…

Q: Let say, the exchange rate is $1.72 per pound, but the equilibrium exchange rate of pounds is $1.70.…

A: We know that equilibrium exchage rates are the rates at which the demand and supply for the same…

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 currency trader observes that in the spot exchange market, 1.00 U.S. dollar can be exchanged for…

A: Here we have to find the cross exchange rate and we can do so by equating both Mexican pesos and the…

Q: In the spot market, P1 = 100 USD, 1 USD = 0.95 Yen, and 1 Yen = 5.50 British Pound. What is the…

A: Exchanges rates are those rates in which currency of one country can be exchanged with another…

Q: Calculate the possible rate for buying SGD (Singapore Dollar) in exchange for selling JPY as well as…

A: SGD buying rate against the JPY : Bid JPY/GBP = Bid JPY/USD / Ask USD / SGD SGD buying rate against…

Q: May I get part C and D Given below are a set of foreign exchange quotes for several currencies…

A: Hello. Since your question has multiple sub-parts, we will solve the first three sub-parts for you.…

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: The current and forward rates between the Japanese yen and the US$ are $0.110 and $0.108%…

A: The interest rate parity theory states that the interest rate differential between countries is…

Q: 1. Assume the following exchange rates for the New Zealand dollar in terms of the US dollar: North…

A: Locational arbitrage is possible when there are discrepancies in the quotation of exchange rates by…

Q: A currency trader observes that in the spot exchange market, 1 U.S.dollar can be exchanged for 3.58…

A: The requirement is to calculate the cross exchange rate between the two currencies. To calculate the…

Q: Suppose a U.S. firm purchases some Chinese handicrafts. The china costs 1,000 Chinese yuan. At the…

A: Handicrafts cost = 1,000 Chinese yuan  $1.00 = 6.2 yuan

Q: The New Zealand dollar to U.S. dollar exchange rateis 1.38, and the British pound to U.S. dollar…

A: 1) Exchange $1 USD into New Zealand dollars: = 1.00 x 1.38 = $1.38 NZD 2) Exchange NZD to British…

Q: From a point of view of Omani investor, which of the following would be a direct quote in the…

A: A direct quote is the foreign exchange rate which states what amount of domestic currency is needed…

Q: Given below are a set of foreign exchange quotes for several currencies against the Australian…

A: a)1AUD = 22.1892 – 22.2317 THB is an indirect quote Direct quote is 1 THB = 0.04498081 / 0.04506696…

Q: rates and prices today: the spot exchange rate today: AU$2.05 per U.K pound; the price level in…

A: According to purchase power parity the prices in two countries must be in equilibrium with exchange…

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: Which type of quotation will be termed a quote of Japanese yen (¥) of $0.007 from the point of view…

A: 1 Japanese Yen = $ 0.007

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: Suppose you have the following spot exchange rates:   USD/AUD 0.5300 AUD/EUR 1.6428 USD/EUR…

A: Triangular Arbitrage is a trading strategy in which profit is earned from the price differential of…

Q: From the base price level of 100 in 1979, Saudi Arabian and U.S. price levels in 2008 stood at 280…

A: Purchasing power parity attempts to covert and compute exchange rates between two currencies by…

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 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

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.