Question
a) Farith Soloz has obtained several forward contract quotations for the Thai baht to determine whether covered interest arbitrage may be possible. He was quoted
a) Farith Soloz has obtained several forward contract quotations for the Thai baht to determine whether covered interest arbitrage may be possible. He was quoted a forward rate of US$0.0225 per Thai baht for a 90-day forward contract. The current spot rate is US$0.0229. 90-day interest rates available to him in the United States are 2.5% while ninety-day interest rates in Thailand are 6.75%. Determine the dollar profit he could generate by withdrawing TB300,000 from his checking account. a) Assume that a Malaysian bank quote the bid rate on Euro is RM4.5820 and the ask rate is RM4.7140. The bid rate on USD is RM4.0555 and the ask rate is RM4.1695. i. Compute the bid ask percentage spread for both two currencies (Euro and USD) (5 marks) ii. Compute the Malaysian banks indirect quotation for Euro and USD.
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