Mia works and lives in Melbourne. Currently she is considering buying some Airbnb shares trading on the Nasdaq stock exchange. The shares are selling for USD 54 per share and she is planning to purchase 500 shares. She approaches a foreign exchange dealer in Melbourne to exchange her Australian dollars into U.S dollars. The rates advertised by the dealer are

USD 1= AUD 1.4265-1.4385

a) What is the term currency in the advertised quote? What is the bid-offer spread for the dealer?

b) What is the rate at which Mia can exchange Australian dollars into U.S dollars? Explain why?

c) How many Australian dollars will she need to purchase 500 Airbnb shares at USD 54 per share given your answer to part b)?

d) Assume after holding the shares for one year, Mia receives a total dividend amount of USD 350 and she wants to convert this into Australian dollars. If the USD has depreciated against the AUD by 40 points in both bid and offer rate then, what is the rate at which she can exchange U.S dollars into Australian dollars? Explain why?

e) How many Australian dollars will she receive given your answer to part d)?

f) Would Mia be better off or worse off by the depreciation of USD against AUD? Explain why?