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QUESTIONS 8&9

5) Suppose you exported something from Mexico to the US and the payment of 20, 000 Pesos did not have to be received until 30 days from now. Your receipt in US dollars would then be? 6) Suppose that the return on a U.K. treasury bill is eight percent annum and the return on a U.S. treasury bill is eight percent annum and that you had $1,000,000 earmarked for short term investment for a period of a month. In which of the securities would you place your money? (Assume you are not a speculator). Show your calcualtions 1 British pound (spot) $1.7748 1 British pound (30-day futures) $1.7776 7) Assume that the British pound is selling in the United States at $1.5985 spot and $1.5939 in the 180-day forward market, and that the Canadian dollar is selling in the United States at $.7336 spot and $.7422 in the 180-day forward market. Both quotes are direct. Which of the following is correct? a) the Canadian dollar is selling at 2.3 percent premium in the forward market b) the Canadian dollar is selling at 1.17 percent premium in the forward market c) the Canadian dollar is selling at 1.17 percent discount in the forward market d) the British pound is selling at 57 percent premium in the forward market 8) Assume you have $200 for an arbitrage transaction, what is your best course of action based on the following exchange rates? $1 = 1.7 CHF $1 = 1.4 PLN $1 = 2.0 PLN 9) Assume you have $1,000 to invest in a triangular arbitrage transaction, what is your best course of action based on the following exchange rates? $1 = 4.5 CHF 1 CHF = 3 DKK $1 = 30 DKK

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