The spot rate for the US dollar in Kuala Lumpur is quoted as below:

 Buy($/MYR)  0.2202

Sell($/MYR) 0.2206

 Questions:

 a) Is this a direct or indirect quote in Kuala Lumpur?

 b) With an assumption that no transaction cost exists, what should be the outright quotation (buy & sell) in indirect term in New York? 

c) Should the outright quotation in New York is as shown below while outright quotation in Kuala Lumpur remains as in (a), how would a foreign exchange trader react to earn arbitrage profit (if exists). Assume that the trader has an option to use RM100,000 for foreign exchange trading. 

Answer rating: 100% (QA)

a This is an indirect quote in Kuala Lumpur An indirect quote expresses the foreign currency in this ... View the full answer