Assume that a company has total of 5 million dollars which can be exchanged for euros, British pounds, yen, and Kuwaiti dinars (KD). Currency dealers set following limits on amount of any single transaction: 5 million dollars, 3 million Euros, 3.5 million pounds, 100 million yen, and 2.8 million KDs. The table below offers typical spot exchange rates. The bottom diagonal rates are reciprocal of top diagonal rates. For example, the rate to exchange one Euro for US dollars equals 1/.769 = 1.30.
|
Dollars
|
Euros
|
Pounds
|
Yen
|
Dinars
|
|
Dollars
|
1
|
.769
|
.625
|
105
|
.342
|
|
Euros
|
1/.769
|
1
|
.813
|
137
|
.445
|
|
Pounds
|
1/.625
|
1/.813
|
1
|
169
|
.543
|
|
Yen
|
1/105
|
1/137
|
1/169
|
1
|
.0032
|
|
Dinars
|
1/.342
|
1/.445
|
1/.543
|
1/.0032
|
1
|
Make a model that would aid the company determine if it is possible to raise the dollar holdings (above the initial $5 million) by circulating currencies through the currency market.