Question
a) You are the trade advisor to a multinational company with an investment of US$1,500,000. The following are the rates quoted on the FOREX market:
a) You are the trade advisor to a multinational company with an investment of US$1,500,000. The following are the rates quoted on the FOREX market:
US $ to Euro 1.22/
US $ to pounds 1.84/
Euros to pounds 1.54/
Calculate the cross rate and determine if a profit opportunity exists. What is the value of that profit if you decide to trade with the US$1.5 million. (7 marks)
) If the starting amount is US$1,750,000, what is the Arbitrage profit which is generated if the exchange rate is 95.765/US$ and US$1.7542/ and observed rate of 175/. (5 marks)
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The Handbook Of Equity Derivatives
Authors: Jack Clark Francis, William W. Toy, J. Gregg Whittaker
1st Edition
0471326038, 978-0471326038
