Question: (A) What are your thoughts on below statements. Which one is the false? Bid-ask spreads are lower for large trading volumes. Bid-ask spreads are lower

(A) What are your thoughts on below statements. Which one is the false?

  1. Bid-ask spreads are lower for large trading volumes.
  2. Bid-ask spreads are lower than 1 percent in wholesale markets.
  3. The best time to trade currency is in the morning of New York.
  4. Bid-ask spreads are higher in retail markets than in wholesale markets.

(B) What are your thoughts on below statements. Which one is the true?

  1. The rate of depreciation of the dollar versus a foreign currency is generally lower than the rate of appreciation of that foreign currency versus the U.S. dollar.
  2. The rate of depreciation of the dollar versus a foreign currency is generally higher than the rate of appreciation of that foreign currency versus the U.S. dollar.
  3. The rate of depreciation of the dollar versus a foreign currency is always equal to the rate of appreciation of that foreign currency versus the U.S. dollar.
  4. When we use continuously compounded rates of change, the rate of depreciation of the dollar versus a foreign currency is equal to the rate of appreciation of that foreign currency versus the U.S. dollar.

(C) Consider the following quotes for the Japanese Yen (JPY)

J.P. Morgan Chase:105.20-30 JPY/USD

Bank of America: 105.35-50 JPY/USD

Can you make arbitrage profits?

  1. Yes, by buying 1 USD from J.P. Morgan Chase at 105.30 JPY and selling it to Bank of America at 105.35 JPY.
  2. There are no arbitrage possibilities.
  3. Yes, by buying 1 USD from J.P. Morgan Chase at 105.30 JPY and selling it to Bank of America at 105.50 JPY.
  4. Yes, by buying 1 USD from J.P. Morgan Chase at 105.20 JPY and selling it to Bank of America at 105.35 JPY.

(D) Consider the following quotes for the Japanese Yen (JPY)

J.P. Morgan Chase:105.40-60 JPY/USD

Bank of America: 105.30-70 JPY/USD

Can you make arbitrage profits?

  1. Yes, by buying 1 USD from J.P. Morgan Chase at 105.40 JPY and selling it to Bank of America at 105.30 JPY.
  2. Yes, by buying 1 USD from J.P. Morgan Chase at 105.40 JPY and selling it to Bank of America at 105.70 JPY.
  3. There are no arbitrage possibilities.
  4. Yes, by buying 1 USD from J.P. Morgan Chase at 105.60 JPY and selling it to Bank of America at 105.70 JPY.

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