At Melbourne airport, you compare the exchange rate quotes of two dealers ANZ and NAB before boarding a flight to London. ANZ is offering AUD/GBP: 0.5568/0.6070 while NAB is offering AUD/GBP:0.5423/0.6171. As you are running late, you do not have the opportunity to change your AUD $10,000 into Pounds. After claiming your baggage at Heathrow Airport, London, you head immediately to the first dealer you see, BigBen Foreign Exchange, who is quoting GBP/AUD: 1.4535/1.5323.

a)What is the term and commodity currency of the Melbourne quotes? What is the term and the commodity currency of the London quote?

b)Among the three dealers, ANZ, NAB and BigBen, which rate is the most attractive and which dealer provides you the best rate? Provide reasons for your answer.

c)As you have no choice but to transact with the London dealer, how much GBP will you receive?

d)Calculate the bid-ask spread of each dealer and identify who is making a higher spread.

Qantas imports diesel fuel from oil refineries in Singapore. Qantas earns revenue in Australian dollars which it has to convert to Singapore dollars to purchase fuel. Would the Qantas benefit from an appreciation or depreciation of the Singapore dollar against the Australian dollar? Explain your answer and assume the price of fuel does not change.

Answer rating: 100% (QA)

a The term currency refers to the currency being quoted and the commodity currency refers to the currency used as a reference In the Melbourne quotes ... View the full answer