|
Country |
Contract |
$/Foreign Currency |
|
Canada – Dollar |
Spot |
0.8437 |
|
|
30-day |
0.8417 |
|
|
90-day |
0.8395 |
|
Japan – Yen |
Spot |
0.004684 |
|
|
30-day |
0.004717 |
|
|
90-day |
0.004781 |
|
Switzerland – Franc |
Spot |
0.5139 |
|
|
30-day |
0.5169 |
|
|
90-day |
0.5315 |
a. (Spot exchange rates) An American business needs to pay (a) 10,000 Canadian dollars, (b) 2 million yen, and (c) 50,000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries?
b. (Spot exchange rates) An American business pays $10,000, $15,000, and $20,000 to suppliers in, respectively, Japan, Switzerland, and Canada. How much, in local currencies, do the suppliers receive?
c. (Exchange rate arbitrage) You own $10,000. The dollar rate in Tokyo is 216.6743. The yen rate in New York is given in the preceding table. Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is the gain (loss) in dollars?
|
Country |
Contract |
$/Foreign Currency |
|
Canada – Dollar |
Spot |
0.8437 |
|
|
30-day |
0.8417 |
|
|
90-day |
0.8395 |
|
Japan – Yen |
Spot |
0.004684 |
|
|
30-day |
0.004717 |
|
|
90-day |
0.004781 |
|
Switzerland – Franc |
Spot |
0.5139 |
|
|
30-day |
0.5169 |
|
|
90-day |
0.5315 |
(Exchange rate arbitrage) You own $10,000. The dollar rate in Tokyo is 216.6743.
The yen rate in New York is given in the preceding table. Are arbitrage profits possible?
Set up an arbitrage scheme with your capital. What is the gain (loss) in dollars?
d. (Cross rates) Compute the Canadian dollar/yen and the yen/Swiss franc spot rates from the data in the preceding table
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