Lesson 7: Principles of Market Valuation

7.1 Find a website that shows exchange rates for all major international currencies. One such site is XE.com. Another is oanda.com. (10 marks)

1. What is the current exchange rate between the Canadian dollar and the US dollar? (2 marks)
2. XE.com allows you to see current exchange rates for gold ounces (type gold into the From or To box). (4 marks, 1 each)

i. What is 1 ounce of gold worth in Canadian dollars?

ii. In US dollars?

iii. What does this imply is the exchange rate between Canadian dollars and US dollars?

iv. Is this the same as your answer to part a?

3. If you saw that the US dollar price of gold was one dollar less than the price you quoted in b.ii., how could you use that information to make an arbitrage profit?

To get full marks, you have to show a full round turn. That is, you need to start and end with the same currency to show the amount of your profit. (4 marks)