Your forex dealer quoted the following exchange rate for spot, the one month RM/US$ rates and RM/
Question:
Your forex dealer quoted the following exchange rate for spot, the one month RM/US$ rates and RM/ £ rates :
RM / US$ | 3.9954/62 | 55/63 |
RM / £ | 5.5020/32 | 56/48 |
Three month interest rate in Malaysia is 5%, in the United States is 6% and in United Kingdom is 4%.
How many ringgit would you receive if you exchange with US$ 115,000 for delivery in three months?
How many £ would you exchange with RM 120,000 for delivery in three months?
What is the annualized premium (discount) on the month bid forward RM/ £ rate?
What is the percentage spread of the RM/£ one month forward quotation?
If the spot rate US/£ is 1.3732/61 were quoted in London, what would you do to make profit on the US/£ arbitrage?
Analyze the conditions that will result in locational arbitrage and the realignments that will follow.
Expert Answer:
1 If you exchange US 115000 for delivery in three months you would receive RM 46723166 This is calcu... View the full answer
