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please help!! 1. You have $10,000 to invest for 90 days. Current spot rate: $1.32/. The 90-day forward rate is $1.38/. 90-day interest rate in
please help!!
1. You have $10,000 to invest for 90 days. Current spot rate: $1.32/. The 90-day forward rate is $1.38/. 90-day interest rate in US is 1.5% and 90-day interest rate in UK is 2.5%. Do we have an arbitrage opportunity? How much can you make? Show all your works! (1 pt) 2. You have $10,000 to invest for 90 days. Current spot rate: $1.32/. The 90-day forward rate is $1.38/. 90-day interest rate in US is 1.5% and 90-day interest rate in UK is 2.5%. What is the no-arbitrage 90-day forward rate? Show all your works! (1 pt) 3. Assume the bid rate of a New Zealand dollar is $.33 while the ask rate is $.335 at Bank X. Assume the bid rate of the New Zealand dollar is $.32 while the ask rate is $.325 at Bank Y. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with? Show all your works! (1 pt) 4. Assume the following bid and ask rates of the pound for two banks as shown below: Bid Ask Bank A $1.41 $1.42 Bank B $1.39 $1.40 As locational arbitrage occurs, what will happen to the Bid and Ask prices of banks that you used for the arbitrage? Show all your works! (1 pt) Use the following table for Question 5 - Question 8. 1 Quoted currency in U.S. 1 c. d. 1 $1.321 $1.326 $1.123 $1.125 1.171 1.173 5. Find "appropriate cross exchange rates" (use five decimal points) Show all your works! (Ipt) a. Bid price for the value of in terms of = ? b. Ask price for the value of in terms of = ? Bid price for the value of in terms of = ? Ask price for the value of in terms of = ? 6. What is the quoted cross exchange rate in U.S. for of in terms of ? (use five decimal points) Show all your works! (0.5 pts) a. Quoted cross exchange rate of the Bid price in U.S. for the value of in terms of ? b. Quoted cross exchange rate of the Ask price in U.S. for the value of in terms of ? 7. Do we have an arbitrage opportunity? If so, which direction do we go? Show all your works! (0.5 pts) 8. If you have $100,000 and follow the direction in the question 3, how much profits can you make? (use two decimal points) Show all your works! (1 pt) Step by Step Solution
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