You have just graduated from the MBA-MSC program and are leaving on a world tour with some
Question:
You have just graduated from the MBA-MSC program and are leaving on a world tour with some friends. You wish to spend $2500 each in Germany, New Zealand, and United Kingdom (usd 7,500 in total). Your bank offers you the following bid-ask quotes:
usd/euro 1.304-1.305,
usd/nzd 0.67-0.69,
usd/gbp 1.90-1.95.
(a) calculate the bid ask spread for usd/gbp
(b) If you accept these quotes, how many euro, nzd, and gbp do you have at departure?
(c) If you return with euro 300, nzd 1,000, and gbp 75, and the exchange rates are unchanged, how many usd do you have?
(d) Suppose that instead of selling your remaining euro 300 once you return home, you want to sell them in UK. At the train station, you are offered gbp/euro 0.66-0.68, while a bank three blocks from the station offers gbp/euro 0.68-0.685. At what rate are you willing to sell your euro 300? How many gbp will you receive?