You have the following quotations for the Chinese yuan (CNY) and the Australian dollar (A$) at the HSBC Bank in China and National Australia Bank in Australia. Can you make a locational arbitrage profit? If yes, calculate the arbitrage profit if you have A$1.76 million or CNY3.42 million. (enter the whole number without sign or symbol) Currency HSBC in China National Australia Bank in Australia Bid Ask Bid Ask Chinese yuan A$0.2010 A$0.2230 A$0.2420 A$0.2673 Australian dollar CNY4.4221 CNY4.9632 CNY3.8255 CNY4.1641

You have the following quotations for the Chinese yuan (CNY) and the Australian dollar (A$) at the HSBC Bank in China and National Australia Bank in Australia. Can you make a locational arbitrage profit? If yes, calculate the arbitrage profit if you have A$1.76 million or CNY3.42 million. (enter the whole number without sign or symbol) Currency HSBC in China National Australia Bank in Australia Bid Ask Bid Ask Chinese yuan A$0.2010 A$0.2230 A$0.2420 A$0.2673 Australian dollar CNY4.4221 CNY4.9632 CNY3.8255 CNY4.1641

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 47QA

See similar textbooks

Similar questions

Match each term in Column A with its related definition in Column B. Column A 1. ____________ Spot rate 2. ____________ Currency appreciation 3. ____________ Translation risk 4. ____________ Transaction risk 5. ____________ Exchange rate Column B a. The rate at which one currency can be traded for another currency. b. The possibility that future cash transactions will be affected by changing exchange rates. c. A month ago, 1 U.S. was worth 8.5 Mexican pesos. Today, 1 is worth 9.0 Mexican pesos. The U.S. dollar has undergone what? d. The degree to which a firms financial statements are exposed to exchange rate fluctuation. e. The exchange rate of one currency for another for immediate delivery (today).
ABC Bank quotes the following for the British pound and the New Zealand dollar: Quoted Bid Price Quoted Ask Price Value of a British pound (£) in $ $1.61 $1.62 Value of a New Zealand dollar (NZ$) in $ $.55 $.56 Value of a British pound in New Zealand dollars NZ$2.95 NZ$2.96 Assume you have $10,000 to conduct triangular arbitrage. What is your profit from this strategy? What is your profit?
Sing Tao wants to import goods for 2.54 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.54 million by taking the forward market hedging strategy. Calculate the Chinese yuan (CNY) costs using the forward market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol).
You are the trade advisor to a multinational company with an investment of US1,500,000. The following are the rates quoted on the FOREX market. US $ to Euro 1.22/€ US$ to pounds 1.84/£ Euros to pounds 1.54/£ Calculate the cross rate and determine if a profit opportunity exists. What is the value of that profit if you decide to trade with the US$1.5 million?
Assume the following information: Quoted Price Value of Canadian dollar in U.S. dollars $.90 Value of New Zealand dollar in U.S. dollars $.30 Value of Canadian dollar in New Zealand dollars NZ$3.02 Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage, and compute the profit from this strategy if you had $1,000,000 to use. What market forces would occur to eliminate any further possibilities of triangular arbitrage? a) Diamond Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist: Lending Rate Borrowing Rate U.S. dollar 7.0% 7.2% Singapore dollar…
The following exchange rates are available to you as Finance Manager for Ganado. (You can buy or sell at the stated rates.) Assume you have an initial SF 12,000,000. Can you make a profit via triangular arbitrage? If so, show the steps and calculate the amount of profit in Swiss francs (Swissies). Mt. Fuji Bank ¥92.00=$1.00 Mt. Rushmore Bank SF 1.02=$1.00 Mt. Blanc Bank ¥90.00=SF1.00
Sing Tao wants to import goods for 2.12 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.12 million by taking the money market hedging strategy. Calculate the Chinese yuan (CNY) costs using the money market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol). TABLE 1 For Chinese yuan (CNY) Spot rate A$0.3213/CNY One-year forward rate A$0.2381/CNY One-year CNY deposit and borrowing rate 3.21% One-year call options Exercise price = A$0.31 Premium = A$0.02 One-year put options Exercise price = A$0.53 Premium = A$0.03 For Australian dollar (A$) Spot rate CNY3.4201/A$ One-year forward rate CNY1.213/A$ One-year A$ deposit and borrowing rate 2.31% One-year call options Exercise price = CNY2.34 Premium = CNY0.12…
Suppose a bank provides the following quotes: Bid 1.2567 CAD per U.S. Dollar and Ask 1.2682 CAD per U.S. Dollar Suppose you would like to buy Canadian Dollars and sell U.S. Dollars. Given the quotes above, what rate would you receive? Group of answer choices 0.0115 CAD per USD 2.5249 CAD per USD 1.2682 CAD per USD 1.2567 CAD per USD
You often travel to Japan and Australia and you need to exchange Japanese and Australian currencies. Your bank provides the following quotes: Currency Bid Ask Japanese Yen (JPY) 105 JPY/USD 110 JPY/USD Australian Dollar (AUD) 0.65 USD/AUD 0.70 USD/AUD If you want to convert 5,000 AUD into JPY, how much JPY will you receive from the bank? (Pick the closest answer) A. 341,250 JPY B. 3,095 JPY C. 385,000 JPY D. None is correct.
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.25 how can you make money? Group of answer choices Buy £ $2/£, buy € at €1.25/£, sell € at $1.50/€. Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£. No arbitrage is possible.
Masons intends to purchase goods valued at £2.09 million, with payment due in one year. To mitigate the exchange rate risk associated with the £2.09 million payment, Masons is considering the forward market hedging strategy. Using the data provided in Table 1, determine the cost in Chinese yuan (CNY) when employing the forward market hedging strategy. (Please input the value as a whole number, excluding any signs or symbols). TABLE 1 For Chinese yuan (CNY) Spot rate £0.3755/CNY One-year forward rate £0.5381/CNY One-year CNY deposit and borrowing rate 8.48% One-year call options Exercise price = £0.52 Premium = £0.03 One-year put options Exercise price = £0.58 Premium = £0.06 For British Pound (£) Spot rate CNY3.5909/£ One-year forward rate CNY1.918/£ One-year £ deposit and borrowing rate 4.71% One-year call options Exercise price = CNY1.64 Premium = CNY0.17…
Given this information. Is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage and compute the profit from this strategy if you had $1,000,000 to use. Value of Canadian dollar in US dollars $ 0.90 Value of New Zealand dollar in US dollars $ 0.30 Value of Canadian dollar in New Zealand dollars NZ$ 3.02 Step 1 1) Different i for Base rate -Quote rate = 2) Different between Spot and Forward = (1) + (2) = invest in _ borrow in _ Step 2 explain using table