1 Do you think Jim will be able to find a bank that provides him with a more favourable spot rate than his local bank? Explain.

As the Sports Exports Company from Ireland exports basketballs to the United Kingdom, it receives British pounds. The cheque (denominated in pounds) for last month’s exports just arrived. Jim Logan (owner of the Sports Exports Company) normally deposits the cheque with his local bank and requests that the bank convert the cheque to euros at the prevailing spot rate

(assuming that he did not use a forward contract to hedge this payment). Jim’s local bank provides foreign exchange services for many of its business customers who need to buy or sell widely traded currencies.

Today, however, Jim decided to check the quotations of the spot rate at other banks before converting the payment into euros.