You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.40 = €1.00 and the dollar-pound exchange rate is quoted at $1.65 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.20, how much money can an astute trader make? Be sure to keep four decimal points when computing currency rates. Be sure to calculate the intrinsic value of the British Pound and based on your calculation, determine whether British Pound is over or under priced.

Answer rating: 100% (QA)

Exchange Rates DollarEuro 140 100 DollarPound 165 100 Cross Rate 100 120 Intrinsic Value of Br... View the full answer