Country Contract $/Foreign C

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?

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(550 words)

Approximate price: $22

Country Contract $/Foreign C

 

 

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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550 words
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