Table 3-1 reports exchange rates not only against the US dollar, but also against the euro and
Question:
Table 3-1 reports exchange rates not only against the US dollar, but also against the euro and the pound sterling. (Each row gives the price of the dollar, euro, and pound, respectively, in terms of a different currency.) At the same time, the table gives the spot dollar prices of the euro 1$1.3221 per euro2 and the pound sterling 1$1.5539 per pound2. Pick any five currencies from the table and show that the three quoted spot exchange rates (in terms of dollars, euros, and pounds) approximately rule out triangular arbitrage. Why do we need to add the word "approximately"?
Transcribed Image Text:
Exchange Rate Quotations TABLE 3-1 CURRENCIES FX EFFECTIVE INDICES Bank of England Indices 114 10T3 1003169 UK 1457 144.31434 USA 110.5 116 Switzerland 2434 M27 ИЗ.7 811 Deer New Zealand 1146 Source: Bank of ErgandNew Sterling ERI boce Jan 2005 100ther indices base average 1990 90 1159 1218 Euro 603 950494.43 100, Indox rebased I/2/05, for furthor information about ER's se www.ban ofengland.co.uk 60 EURO DOLLAR POUND Clasing Day's Closing Day's Clsing Day's (Jey) 3 2025 0.0648 42338 0.71 49761 00959 ouble) 32 2100 0.0300 425833 0.0442 50.0495 00c01 Cosng Day's Cosing Day's Clasing Day's Md Cur (Peso) 5.3015 00077 70089 0 0240 82378 00198 Pland (AS》 1.0545 0.0050 1.3941 ОСОЗ 1链85 00092 Roran. dlewLeu) 34133 .0.0294 45125-0.0300 5 3037-00408 Dina) 0.3770 Boliia (Bolan 69100 0.4985 00010 0.5858 0.0006 Russia 91354 00179 10.7371 00100 SArabia (R) 3.7503 0,0001 4981 0,0097 82T4 003 (S3) 12453 -0.0014 1.6464 0.0015 1.9350 00003 C$) 1.0208 ฎ,01 10 1.3495-00119, 1.5861-00156 SuthAfrica (R) 99518-00399 131568-00268 154636-00436 Pesol 500.500.5.0500661 686-53619277 702-71138 suth Korea 꺄 1112ca 1.22501476 a3 4520tlasz as214 (SK) 65789 0.0018 5976 0.0195 102225 00123 S) 09351 0.0002 1 2362 .0027 14530 00017 (TS) 7180 0.0795 39 2887 0.0276 46.1773 0003 (ВО 306300 0.0300404944 0.1192 47.5944 00909 (Dinar) 16248 -0.0049 21481 0,0023 2.5247 00052 (Lira) 18774 -0.0188 24320 -0.0199 2.9171 00265 Drhamo36729 0.0000 48558 0.0095 5.7072 00052 (RS) 2.1309 0.0027 2.8172 00090 3.3111 00072 u 6.1335 00027 8.1088 00124 9.5305 00047eden Pso 1897.17 136300 2508.15 130615 29472 18 4083 tzerland Costa Rca (Colon 498.980 00300 659 677 12573 775341 06772 lawan Caech Rap (ocua) 19.3473 0.1597 255780 0105 30.0627 02200 Denntark 5.6394 00115 7,4555 0006 87627 00098u 92398 00182 10.8598 00102 10.2625 0002 120619 00113 Egyp 6.980 UK(06436)" ro onth 15539 0.0014 03509 0.0010 Font) 223.101 3.1794 2949503 6150 346 655 4.6122 R 57.0750 0.1850 75.4560 03925 88.6850 03699 ladresē (Rapah》 980500 12500129627 419965 152355 336230 178038 (Sh) 3.6120 0.0023 4.7753 0E4 5.6125 0.0017 15529 0.0000 03518 0,0000 5510 0.0003 08544 0.0000 6232 8 31 9241 19078.9 Uraine (rywna) 81376 0.0150 10.7532 0.0014 12.6445 00115 (Peso) 20 3250 0.4500 27:5317 0.649 323590 0.23 Y 97.3850 0.9900 128.748 0630 151322 1.3957 973715-00010 128750 -осоа 151270 .0.0014 97.3382 00021 128.75100037 151 160 0.0013 1.3221 0.0026 15539 0.0014 97.0400 00110 128584 00522 150509 00441 e ear One ar enezuela Bdinat Fuerte) 62921 3251 0.0003 1.5510 00003 83135 0.0164 9.7770 00091 Dorg) 210180 .0000 277358 61.2433 32668.8 382180 112.242 02203 131922 01231 Diror)0.2847 00003 03764 00004 0.4424 (M5) 3.0935 00105 4.0888 00219 48058 00207 Mexioo(New Pesz) 12.7217 01774 168187 02009 19.167 02669 New Zeeland (NZS)1.2652 00106 16726 00173 1659 00183 Euro(0 554) (Euro) 13221 0.0020 Naira) 159.700 08000 211.131 14703 248150 1.4735 One Month 1.1749 00000 57702 00076 75285 00050 8650 0.0035 Three Month 98.4750 0100 130,189 02093 153.015 0.1583 One Yor Pakistanu (Nen Sel)2.7280 00060 36066 00003 4.2389 00054 Phippines 42.2400 1000 55.8434 02418 65.6347 02165 0.6597-0,0011 08721 0.0002 0250-00007.נ Rates are derived from WWResters at 4pm(Londen time The dlosing mid-pointrates for the Euro and Cagainst the S are shawn in brackets The other Figunesis the dolar columnof both the Euroand Serlig ro sa e ist e reciprocal kr in ire w market colier on erecy deno nate y 1 О. Sone w uesa ronded by the FT. Thee chang, rates printed į this table are a oa a ble ntereet at http:/rww.FT.cominarketsdata Euro Locking Rates Austrian Schling 13.7603 B pun/Lembourz 340.75 Irish Punt 0.787 564, Itallian Lira193627, Matn 0 4293 Netherlands Guilder 2.20371,Portuguese Esxcudb 200.482, Slovenia Tolar 239.64,Spanibh Peseto 166386 franc 40 3399. Cyprus 0.585274.Finnish Markka 5.94572, Franch Franc 6.55057,Gorman Mark 1.95583, Greek Drachma
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 69% (13 reviews)
Triangular arbitrage is the process of converting one currency to another converting it again to a t...View the full answer
Answered By
Joseph Mwaura
I have been teaching college students in various subjects for 9 years now. Besides, I have been tutoring online with several tutoring companies from 2010 to date. The 9 years of experience as a tutor has enabled me to develop multiple tutoring skills and see thousands of students excel in their education and in life after school which gives me much pleasure. I have assisted students in essay writing and in doing academic research and this has helped me be well versed with the various writing styles such as APA, MLA, Chicago/ Turabian, Harvard. I am always ready to handle work at any hour and in any way as students specify. In my tutoring journey, excellence has always been my guiding standard.
4.00+
1+ Reviews
10+ Question Solved
Related Book For
International Finance Theory and Policy
ISBN: 978-0133423648
10th edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
Question Posted:
Students also viewed these Corporate Finance questions
-
Table 14-1 reports exchange rates not only against the U.S. dollar, but also against the euro and the pound sterling. (Each row gives the price of the dollar, euro, and pound, respectively, in terms...
-
1. If the Chinese yuan is undervalued by 44 per cent in PPP terms against the US dollar, and the Swiss franc overvalued by 25 per cent, what implications does this have for the interpretation of...
-
a. Create a spreadsheet model for this problem and solve it. b. What is the optimal trading plan? c. What is the optimal transaction cost (in equivalent USD)? d. Suppose that another executive thinks...
-
The Apache NetBeans IDE is mainly composed of NetBeans Open-Source IDE and NetBeans Platform. (True/False)
-
Warren Co. purchased a put option on Echo common shares on January 7, 2012, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the...
-
Pitino acquired 90 percent of Breys outstanding shares on January 1, 2013, in exchange for $342,000 in cash. The subsidiarys stockholders equity accounts totaled $326,000 and the noncontrolling...
-
A car rental agency has 19 compact cars and 12 intermediate-size cars. If four of the cars are randomly selected for a safety check, what is the probability of getting two of each kind?
-
Ethanol (C2H5OH) melts a - 144 oC and boils at 78 C. The enthalpy of fusion of ethanol is 5.02 kj/mol, and its enthalpy of vaporization is 38.56 kj/mol. The specific heats of solid and liquid ethanol...
-
You are considering a project that requires a capital investment of $100 and will last for three years. Economical depreciation is straight line over 3 years (33.3% in each of the 3 years)) while tax...
-
A furniture manufacturing company working on a 40 hours/week basis makes 100 chairs. The sales price is RM70/each and the company has the following costs: Direct materials = RM700 Direct labor =...
-
As defined in footnote 3, cross exchange rates are exchange rates quoted against currencies other than the U.S. dollar. If you return to Table 3-1, you will notice that it lists not only exchange...
-
Since 1942, the small country of Panama has had no paper currency other than the United States dollar, which circulates freely internally. What would you expect to be true about the inflation rate in...
-
Access the FASB website (www.fasb.org) and answer the following: a. List the titles of the two most recently issued ASUs. b. Examine 2014, 2015, and 2016 ASUs. Identify and list the PCC ASUs.
-
Read your parents' life insurance policy, or that of a friend or relative, cover to cover. Prepare a one-page report of key policy features including beneficiary designation, policy clauses,...
-
Interview a friend employed in your career field or interview a benefits representative from a company agency in your career field. Discuss the benefits that you might expect to receive as an...
-
The draft accounts for the year ended 30 June 2019 and a balance sheet as at that date for S. Steiner are submitted to you. Towards the end of the financial year her accountant resigned and she...
-
As a part of a group project, interview a representative from a nursing home, extended care facility, or other assisted living facility and discuss the costs and payment methods used. Are residents...
-
Talk to one or more senior citizens about their experiences with Medicare and/or supplemental Medigap health insurance. How does this coverage and the processing of claims compare with the coverage...
-
Refer to Exercise 8, which required a description of a hybridization simulation. a. Conduct the simulation and record the number of yellow peas. If possible, obtain a printed copy of the results. Is...
-
Two mutually exclusive investment alternatives are being considered. Alternative A requires an initial investment of $20,000 in a machine. Annual operating and maintenance costs are anticipated to be...
-
How does the fact that many goods are non traded affect the extent of possible gains from trade?
-
We have focused on the case of trade involving only two countries. Suppose that there are many countries capable of producing two goods, and that each country has only one factor of production,...
-
In 1986, the price of oil on world markets dropped sharply. Since the United States is an oil-importing country, this was widely regarded as good for the U.S. economy. Yet in Texas and Louisiana,...
-
The Casings Plant of Wyoming Machines makes plastics shells for the company's calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 640,000...
-
River Walk Tours is expected to have an EBIT of $184,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to $11,000, $1,500, and $13,000, respectively....
-
Coronado Corporation purchased a depreciable asset for $576000 on January 1, 2023. The estimated salvage value is $54000, and the estimated useful life is 9 years. The straight-line method is used...
Study smarter with the SolutionInn App