sampleproblem international finance
International Finance – FINC 4521 – Chapter 5 – Sample Problems and Answers
1. Suppose the spot ask exchange rate, Sa($|£), is $2.10 = £1.00 and the spot bid exchange rate, Sb($|£), is $2.07
= £1.00. If you were to buy $5,000,000 worth of British pounds and then sell them five minutes later without the bid or ask changing, how much of your $5,000,000 would be "eaten" by the bid-ask spread?
2. The dollar-euro exchange rate is $1.5968 = €1.00 and the dollar-yen exchange rate is ¥108.0030 = $1.00.
What is the euro-yen (€/¥) cross rate?
3. The dollar-euro exchange rate is $1.5451 = €1.00 and the dollar-pound exchange rate is $2.0975 = £1.00.
What is the euro-pound (€/£) cross rate?
4. The dollar-Swiss Franc exchange rate is $0.8922 = SF1.00 and the dollar-Australian Dollar exchange rate is
$0.7620 = AUD1.00. What is the Swiss Franc to Australian Dollar (SF/AUD) cross rate?
5. The Dollar to Euro spot exchange rate is $1.4909/€1.00, the Dollar to Yen spot exchange rate is
$0.009346/¥1.00, and the Euro to Yen spot exchange rate is €0.006501/¥1.00. Determine the triangular arbitrage profit that is possible if you have $8,000,000.
6. The Dollar to Swiss Franc spot exchange rate is $0.8918/SF1.00, the Dollar to Pound spot exchange rate is
$1.6302/£1.00, and the SF to Pound spot exchange rate is SF1.7914/£1.00. Determine the triangular arbitrage profit that is possible if you have $8,000,000.
7. The current spot exchange rate is $2.0507/£ and the three-month forward rate is $2.0753/£. You enter into a short position on £120,000. At maturity, the spot exchange rate is $2.0919/£. How much have you made or lost?
8. The current spot exchange rate is $2.0507/£ and the three-month forward rate is $2.0753/£. You enter into a long position on £120,000. At maturity, the spot exchange rate is $2.0919/£. How much have you made or lost?
9. The current spot exchange rate is $1.7261/£ and the three-month forward rate is $1.7779/£. You enter into a short position on £130,000. At
1. Suppose the spot ask exchange rate, Sa($|£), is $2.10 = £1.00 and the spot bid exchange rate, Sb($|£), is $2.07
= £1.00. If you were to buy $5,000,000 worth of British pounds and then sell them five minutes later without the bid or ask changing, how much of your $5,000,000 would be "eaten" by the bid-ask spread?
2. The dollar-euro exchange rate is $1.5968 = €1.00 and the dollar-yen exchange rate is ¥108.0030 = $1.00.
What is the euro-yen (€/¥) cross rate?
3. The dollar-euro exchange rate is $1.5451 = €1.00 and the dollar-pound exchange rate is $2.0975 = £1.00.
What is the euro-pound (€/£) cross rate?
4. The dollar-Swiss Franc exchange rate is $0.8922 = SF1.00 and the dollar-Australian Dollar exchange rate is
$0.7620 = AUD1.00. What is the Swiss Franc to Australian Dollar (SF/AUD) cross rate?
5. The Dollar to Euro spot exchange rate is $1.4909/€1.00, the Dollar to Yen spot exchange rate is
$0.009346/¥1.00, and the Euro to Yen spot exchange rate is €0.006501/¥1.00. Determine the triangular arbitrage profit that is possible if you have $8,000,000.
6. The Dollar to Swiss Franc spot exchange rate is $0.8918/SF1.00, the Dollar to Pound spot exchange rate is
$1.6302/£1.00, and the SF to Pound spot exchange rate is SF1.7914/£1.00. Determine the triangular arbitrage profit that is possible if you have $8,000,000.
7. The current spot exchange rate is $2.0507/£ and the three-month forward rate is $2.0753/£. You enter into a short position on £120,000. At maturity, the spot exchange rate is $2.0919/£. How much have you made or lost?
8. The current spot exchange rate is $2.0507/£ and the three-month forward rate is $2.0753/£. You enter into a long position on £120,000. At maturity, the spot exchange rate is $2.0919/£. How much have you made or lost?
9. The current spot exchange rate is $1.7261/£ and the three-month forward rate is $1.7779/£. You enter into a short position on £130,000. At