Question 1. 

A firm has the following account balances

Account Balance

USD Account $3,500

EUR Account 5,150

GBP Account 1,000

The currency rates are as follows:

GBP/USD 1.0010/$

EUR/GBP 0.9855/

USD/EUR $1.2750/

The manager is considering converting and holding all three accounts to a single currency.

Required:

1. What would be the total in the account if all amounts are in GBP?
2. What would be the total in the account if all amounts are in USD?

Question 2.

Miguel Paxton is a trader in New York. Miguel has $750,000 as investment capital. He has obtained the following currency rates that he believes may be used to produce an arbitrage gain.

Premiere Bank USD/GBP $1.0010/

Queen's Bank EUR/GBP 0.9855/

Barcelona Bank USD/EUR $1.2750/

Required: Use the currency rates provided to show the arbitrage paths and whether an arbitrage gain is possible.

Question 3.

A multinational firm domiciled in Jamaica has the following balances on its books:

Receivables

US$23,450

Euro 11,900

Payables

US$6,350

Euro 2,200

The current exchange rates are as available:

Sport rate J$136/$

Spot rate J$154/

Required:

1. What is the total value of the firm's receivables?
2. What is the total value of the firm's payables?
3. Assume the currency rates change to J$140/$ and J$152/. a. What is the new receivables total?b. By what percentage did the firm's payables change?