1) Assume Polands currency (zloty) is worth $.17 and the Japanese yen is worth $.008. What is the cross rate of the zloty with respect to the yen? How man yen equals a zloty?

2) JP Morgan Chase Bank expects that the Mexican peso will depreciate against the dollar from its sport rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rates exist:

Lending Rate Borrowing Rate

U.S dollar 8.0% 8.3%

Mexican peso 8.5% 8.7%

Assume that JP Morgan Chase has a borrowing capacity of either $10 million or $70 million pesos in the interbank market, depending on which currency it wants to borrow.

a) How could JP Morgan Chase attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy?

b) Assume all the preceding information with this exception: JP Morgan Chase expects the peso to appreciate from its present spot rate of $.15 to $.17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy?

3) Capital One Bank expects that the Singapore dollar will depreciate against the U.S 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 22.0% 24.0%

Capital one Bank considers borrowing $10 million Singapore dollars in the interbank market and investing the funds in dollars for 60 days. Estimate the profits (or losses) that could be earned from this strategy. Should Capital One Bank pursue this strategy?