Question: Note that this paper uses the standard notation for exchange rates, for example EURUSD 1.1 means $1.1 for 1 euro 1. a. Calculate to 4

Note that this paper uses the standard notation for exchange rates, for example EURUSD 1.1 means "$1.1 for 1 euro"

1. a. Calculate to 4 decimal places the new exchange rate after a 2% increase in the value of the dollar given a current exchange rate of EURUSD 1.1

b. Given the following exchange rates calculate the GBPEUR rate to 4 decimal places.

EURUSD 1.1043

GBPUSD 1.2970

c. Explain the relationship between your answer to part b of this question and triangular arbitrage.

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