1) You are looking at your friends work and you see that they have the financial quotes written down as AUD/USD = 0.9277 and JPY/USD = 0.0094. Everything is factually correct with what he has written down.

a. How would these quotes actually show up in the financial press?

b. Write down the direct quote and indirect quote for each currency pair (assuming we are in the US)

c. What is the AUD/JPY exchange rate?

d. Suppose you saw AUD/JPY with a price of 100.0000. Device a strategy to make a profit.

2) You are a market maker following USD/MXN (Mexican Peso). You quote to the market an exchange rate of USD/MXN 13.1400 / 13.1450 You decide to enter into a trade (as the market maker) with a counterparty to BUY $10mil (USD). Later on, you quote to the market: USD/MXN 13.6500 / 13.6600 Answer the following questions:

a. Compute the bid/ask spread at each point of time.

b. If you were to buy back the Pesos, what would be your P&L?