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4. This year you finally will have the chance to take the vacation trip of your dreams a trip around the world (Roman Coliseum! Taj
4. This year you finally will have the chance to take the vacation trip of your dreams a trip around the world (Roman Coliseum! Taj Mahal! Machu Picchu!). Yesterday, as you were planning your trip, you saw the following currency quotes on your Bloomberg screen (note: PEN - Peru New Sol, INR - India Rupee): USD EUR PEN INR INR PEN EUR - 71.4286 ??? ??? 0.9049 - USD 1.1051 0.2959 0.0140 You also checked the 3-month forward rate for the euro versus the dollar and found a direct rate of 1.1038 and a reciprocal rate of 0.9060. Required a. Calculate the number in the above table indicated by the question marks (remember to show your work!). b. What is the appropriate spot cross rate between the Indian rupee and the euro? c. Is the 3-month forward euro, priced in US dollars, selling at a discount or premium? Of how much? d. Bank Krupt of Frankfurt is currently quoting a spot rate of 79.0100 Indian rupee per euro. 1) Is this bank trying to accumulate rupee or euro? 2) Show how a German banker could use geographic arbitrage to profit from Bank Krupt's quote. Calculate the arbitrage profit per EUR 1.00 run through the arbitrage plan
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