Q8. Assume the spot rate of the British pound is $1.60. The expected spot rate one year from now is assumed to be $1.77. What percentage appreciation does this reflect? Q9. Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $.20 to $.15 in 15 days. The following interbank lending and borrowing rates exist: Assume that Blue Demon Bank has a borrowing capacity of either $15 million or 80 million pesos in the interbank market, depending on which currency it wants to borrow. a. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. b. Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present spot rate of $.20 to $.25 in 20 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. Q10. A U.S. firm would like to speculate on interest rate where it plans to borrow a currency at a lower interest rate and invest in a currency that pays a higher interest rate. The company decides to borrow 400,000 euros that costs 1.7% for one month and invests in British Pounds that pays 3.5\% interest for one month as well. Assume that the British pounds spot rate is presently $1.74, while the euro is presently worth $1.10. Assume also that the euro depreciates by 2.5% over the month against both the pounds and the US dollar while the British pounds spot rate remains the same. What do we call this strategy and what is the expected profit from it? Q1. Utah Bank's bid price for Canadian dollars is $.7938 and its ask price is $.81. What is the bid/ask percentage spread? Q2. If the direct exchange rate of the euro is $1.25, what is the euro's indirect exchange rate? That is, what is the value of a dollar in euros? Q3. Convert the following Direct Exchange Rate Quotations to Indirect Exchange Rate Quotations: Q4. Assume Poland's currency (the zloty) is worth \$.17 and the Japanese yen is worth \$.008. What is the cross rate of the zloty with respect to yen? That is, how many yen equal a zloty? Q5. You just came back from Canada, where the Canadian dollar was worth \$.70. You still have C\$200 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for \$.60. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for $.10 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$200 for 1,300 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain. Q6. If 1 US dollar is worth 0.80 Euros, what is the exchange rate for converting Euros to US dollars? Write the quote in the correct format as well. Q7. Nawaf is traveling from France to the US. He knows that 1 US dollar is worth 0.80 Euros. How much is 350 Euros worth in US dollars