Question
Agnes bank in Japan has committed to deliver yen in 3 months to OK Ltd in US, a corporate customer. The spot rate is 130
Agnes bank in Japan has committed to deliver yen in 3 months to OK Ltd in US, a corporate customer. The spot rate is 130 yen to the dollar and the 3 month forward rate is 120 yen per dollar. In recent years, there are an increasing trading dealing with foreign currency in Agnes bank.
Required:
- Are there costs to hedging this exposure with the forward market? Explain. (10 marks)
- Explain TWO (2) reasons about the level of foreign currency trading has increased in Agnes bank? (5 marks)
- What is triangular arbitrage? What is a condition that will give rise to a triangular arbitrage opportunity? (10 marks)
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Accounting What the Numbers Mean
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,
9th Edition
978-0-07-76261, 0-07-762611-7, 9780078025297, 978-0073527062
