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6. Suppose you observe the exchange rate quotes in the table below. BID ASK EUR/USD: 1 = SGD/USD: S$1 = $1.1208 $0.6976 $1.1212 $0.6982 a)
6. Suppose you observe the exchange rate quotes in the table below. BID ASK EUR/USD: 1 = SGD/USD: S$1 = $1.1208 $0.6976 $1.1212 $0.6982 a) (5 points) Find the implied) cross rate for EUR/SGD (Both bid and ask). (SGD Singapore Dollar=S$) Solution: b) (15 points) Suppose you observe the exchange rate quotes in the table below. (Now you have bank quotes for EUR/SGD) BID EUR/USD: 1 = SGD/USD: S$1 = EUR/SGD: 1 = $1.1208 $0.6976 S$1.5971 ASK $1.1212 $0.6982 S$1.5982 Is there an arbitrage opportunity? Briefly explain. If there is an arbitrage opportunity, how much arbitrage profit can you earn if you borrow 1000? Solution
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