7. You visited the foreign exchange trading room of a major bank when a trader asked for quotes of the euro from various correspondents and heard the following: Bank A Bank B 1.1210-15 12-17 What do these quotes mean? 8. Do you think the dollar exchange rate of the British pound or the Polish zloty has a higher percentage bid-ask spread? Why? 9. Here are some historical quotes of the USD:JPY (yen per dollar) exchange rate given simultaneously on the phone by three banks: Bank A 121.15-121.25 Bank B 121.30-121.35 Bank C 121.15-121.35 Are these quotes reasonable? Is there an arbitrage opportunity? 10. At a certain point in time, the euro is quoted as EUR:USD 1.1610-1.1615, and the Swiss franc is quoted as USD:CHF 1.4100-1.4120. What is the implicit EUR:CHF- EUR:CHF quo- tation? 11. At a certain point in time, a bank quoted the following exchange rates against the dollar for the Swiss franc and the Australian dollar. $:SFr 1.5960-70 $:A$ = 1.8225-35 Simultaneously, an Australian firm asked the bank for a A$:SFr quote. What cross rate would the bank have quoted? 12. At a certain point in time, a bank quoted the following exchange rates against the dollar for the Swiss franc and the Australian dollar. $:SFr 1.5960-70 = $:A$ 1.8225-35 Simultaneously, a Swiss firm asked the bank for an SFr:A$ quote. What cross rate would the bank have quoted? 13. Based on historical Japanese yen and Canadian dollar quotes by a bank, the implicit yen per Canadian dollar cross rate quotation was C$:=82.5150-82.5750. What would be the implicit Canadian dollar per yen cross rate quotation, Y:C$? 14. Suppose that a quote for the dollar spot exchange rate of Danish kroner (symbol DKr or code DKK) is DKr8.25 per dollar, and a quote for the dollar spot exchange rate of Swiss Franc is SFr1.65 per dollar. a. What should be the quote for the SFr:DKr cross rate so that there are no arbitrage opportunities (ignore transaction costs)? b. Suppose a bank is offering a quote for the SFr:DKr cross rate as DKr5.20 per SFr. In this quote, which currency is overvalued with respect to the other? 1. If the exchange rate value of the British pound goes from U.S. $1.80 to U.S. $1.60, then a. The pound has appreciated, and the British will find U.S. goods cheaper. b. The pound has appreciated, and the British will find U.S. goods more expensive. c. The pound has depreciated, and the British will find U.S. goods more expensive. d. The pound has depreciated, and the British will find U.S. goods cheaper. 2. If the exchange rate between the Australian dollar and the U.S. dollar, $:A$, changes from A$1.60 to A$1.50, then a. The Australian dollar has appreciated, and the Australians will find U.S. goods cheaper. b. The Australian dollar has appreciated, and the Australians will find U.S. goods more expensive. c. The Australian dollar has depreciated, and the Australians will find U.S. goods more expensive. d. The Australian dollar has depreciated, and the Australians will find U.S. goods cheaper. 3. Over a period of time in the past, the exchange rate between the Swiss franc and the U.S. dollar, $:SFr, changed from about 1.20 to about 1.60. Would you agree that over this period, Swiss goods became cheaper for Americans? 4. Over a period of time in the past, you noticed that the exchange rate between the Thai baht and the dollar changed considerably. In particular, the $:baht exchange rate increased from 25 to 30. a. Did the Thai baht appreciate or depreciate with respect to the dollar? By what per- centage? b. By what percentage did the value of the dollar change with respect to the Thai baht? 5. A foreign exchange trader with a U.S. bank took a short position of 5 million when the :$ exchange rate was 1.45. Subsequently, the exchange rate changed to 1.51. Is this movement in the exchange rate good from the point of view of the position taken by the trader? By how much did the bank's liability change because of the change in exchange rate? 6. A financial newspaper provided the following midpoint spot exchange rates. Compute all the cross exchange rates based on these quotes. :$ = 0.9119 $:SFr = 1.5971 $:\ = 128.17