International finance

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Spot Exchange Rates Problems
Fin 310
1. C$ 1 = $0.842 and 1 = $1.323. What is C$/?
2. Suppose the direct quote for sterling in New York is 1.1115 54. What is the direct quote for dollars in London?
3. Suppose the spot quote on the Mexican Peso is $0.1332 47 and the spot quote on the Canadian Dollar is $0.8182 94.
a. What is the direct spot quote for the Peso in Toronto?
b. Compute the percentage bid-ask spread on the Peso and Can. Dollar.
4. Suppose you observe the following direct spot quotations in New York and Toronto, respectively: 0.8000 50 and 1.2500 60. What are the arbitrage profits per $1 million?
5. Suppose the SF is quoted at 0.4442 86 in London and the pound sterling is quoted at 2.2523 42 in Bern.
a. Is there a profitable arbitrage situation? Describe it.
b. Compute the percentage bid-ask spreads on the pound and SF.
6. Assuming no transaction costs. Suppose 1 = $1.9411 in New York, $1 = 0.8756 in Paris and 1 = 0.6588 in London. How could you take profitable advantage of these rates?



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