QUESTION 3

1. Assume you have $1,000,000 to use. Based on the information below, is there a possibility of getting profit? Justify your answer.

	Quoted Price
Value of New Zealand dollar in U.S dollars	$0.30
Value of Canadian dollar in U.S dollars	$0.90
Value of Canadian dollar in New Zealand dollars	NZ$3.02

2. There is $500,000 to invest. U.S is offering a 60-day interest rate of 6 percent per annum, while Malaysia is giving 12 percent per annum for a tenure of 60 days. The spot rate of Ringgit Malaysia (RM) is $0.110 and the forward rate is $0.108. Ignoring all the tax effects, Would an American investor or Malaysian investor benefit from this arbitrage?

3. Agnes is a speculator in investing in options. Agnes had purchased a put option on Australian dollar with a strike price of $0.80. the premium is $0.02. on the expiration date, the Australian dollar spot rate is $0.74.

a. Should Agnes exercise the option on this date or just let the option expire?

b. Calculate Agness net profit per unit?

c. Calculate the net profit per unit to the seller of this put option