You observe the following exchange rates in the following markets ...

By Investopedia Staff AAA
Q:
You observe the following exchange rates in the following markets: New York: 120yen/$, Tokyo: 57yen/DM and Frankfurt: 2.013DM/$. If a trader was to exploit the mispricing that existed, what would be his or her riskless profit in U.S. dollar terms if he or she could borrow $1,000,000?
A) $45,834
B) $73,842
C) $37,562
D) $52,291
A:

The correct answer is: a)


RELATED FAQS

  1. Unemployment resulting from changes in the basic composition of the economy ... ...

    The correct answer is a. An example of structural unemployment is the technological revolution. Computers might have eliminated ...
  2. A 6.4% coupon bond that is expected to mature in five years is currently trading ...

    The correct answer is: C) Step 1: Future value of reinvested coupons. PMT = 3.20; n = 10; I = 2.9% Therefore, FV = 36.516
  3. You currently are holding a portfolio of bonds. Interest rates are expected to increase ...

    The correct answer is c. Bonds with high convexity are less affected by changes in interest rates than bonds with lower convexity. ...
  4. If consumption was $2B, investment $0.5B, government purchases $3B, exports $1B ...

    The correct answer is b. GDP = Consumption + Investment + Government Purchases + (Exports - Imports) So, GDP = 2+0.5+3+(1-2) ...
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center