Assignment:
|
Country
|
Contract
|
$/Foreign Currency
|
|
Canada-dollar
|
Spot
|
.8437
|
|
|
30-day
|
.8417
|
|
|
90-day
|
.8395
|
|
Japan-yen
|
Spot
|
.004684
|
|
|
30-day
|
.004717
|
|
|
90-day
|
.004781
|
|
Switzerland
|
Spot
|
.5139
|
|
|
30-day
|
.5169
|
|
|
90-day
|
.5315
|
Question 1. (Spot exchange rates) An American business pays $10,000, $15,000, and $20,000 to suppliers in, respectively, Japan, Switzerland, and Canada. How much, in local currencies, do the suppliers receive?
Question 2. (Exchange rate arbitrage) You own $10,000. The dollar rate in Tokyo is 216.6743. The yen rate in New York is given in the preceding table. Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is the gain (loss) in dollars?