Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.

Get a Professional Answer

Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.

100% Satisfaction Guarantee

Rate the answer you receive.

Ask Dr. Amit Your Own Question

Dr. Amit,
Professional w/Adv. Degree

Category: Homework

Satisfied Customers: 1041

Experience: MBBS, Technical Analyst, CFTE, Net Researcher, Assisted many with H.Work of various fields

12193477

Type Your Homework Question Here...

Dr. Amit is online now

Suppose that the pound is pegged to gold at £20 per ounce and

Resolved Question:

Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 per ounce. This implies an exchange rate of $1.75 per pound. If the current market exchange rate is $1.80 per pound, how would you take advantage of this situation? Hint: assume that you have $350 available for investment

a) Start with $350. Buy 10 ounces of gold with dollars at $35 per ounce. Convert the gold to £200 at £20 per ounce. Exchange the £200 for dollars at the current rate of $1.80 per pound to get $360.

b) Start with $350. Exchange the dollars for pounds at the current rate of $1.80 per pound. Buy gold with pounds at £20 per ounce. Convert the gold to dollars at $35 per ounce.

c) a) and b) both work

d) None of the above

The €/$ spot exchange rate is $1.50/€ and the 90-day forward premium is 10 percent. Find the 90-day forward price.

a) $1.65/€

b) $1.5375/€

c) $1.9125/€

d) None of the above

The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€. You enter into a short position on €1,000. At maturity, the spot exchange rate is $1.60/€. How much have you made or lost?

a) Lost $100

b) Made €100

c) Lost $50

d) Made $150

The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1.62/€ in three months. Assume that you would like to buy or sell €1,000,000. What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation

a) Sell €1,000,000 forward for $1.50/€.

b) Buy €1,000,000 forward for $1.50/€.

c) Wait three months, if your forecast is correct buy €1,000,000 at $1.52/€.

d) Buy €1,000,000 today at $1.55/€; wait three months, if your forecast is correct sell €1,000,000 at $1.62/€. You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.20 how much money can an astute trader make?

a) No arbitrage is possible

b) $1,160,000

c) $41,667

d) $40,000 The current exchange rate is €1.00 = $1.50. Compute the correct balances in Bank A's correspondent account(s) with bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at bank B for $150,000 using its correspondent relationship with Bank B.

a) Bank A's dollar-denominated account at B will fall by $150,000.

b) Bank B's dollar-denominated account at A will fall by $150,000.

c) Bank A's pound-denominated account at B will fall by €100,000.

d) Bank B's pound-denominated account at A will rise by €100,000. Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00

a) €1.25/£1.00

b) $1.25/£1.00

c) £1.25/€1.00

d) €0.80/£1.00 If the annual inflation rate is 5.5 percent in the United States and 4 percent in the U.K., and the dollar depreciated against the pound by 3 percent, then the real exchange rate, assuming that PPP initially held, is

a) 0.07

b) 0.9849

c) -0.0198

d) 4.5 Suppose that the one-year interest rate is 3.0 percent in the Italy, the spot exchange rate is $1.20/€, and the one-year forward exchange rate is $1.18/€. What must one-year interest rate be in the United States?

a) 1.2833%

b) 1.0128%

c) 4.75%

d) None of the above The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, at what exchange rate will you break-even?

a) $1.58 = €1.00

b) $1.62 = €1.00

c) $1.50 = €1.00

d) $1.68 = €1.00 From the perspective of the writer of a put option written on €62,500. If the strike price is $1.55/€, and the option premium is $1,875, at what exchange rate do you start to lose money?

a) $1.52/€

b) $1.55/€

c) $1.58/€

d) None of the above Today's settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME Yen contract is ¥12,500,000). If you have a long position in one futures contract, the changes in the margin account from daily marking-to-market, will result in the balance of the margin account after the third day to be

a) $1,425.

b) $1,675.

c) $2,000.

d) $3,425 The current spot exchange rate is $1.55 = €1.00; the three-month U.S. dollar interest rate is 2%. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. What is the least that this option should sell for?

a) $0.05×62,500 = $3,125

b) $3,125/1.02 = $3,063.73

c) $0.00

d) none of the above The current exchange rate is €1.25 = £1.00 and a British firm offers a French customer the choice of paying a £10,000 bill due in 90 days with either £10,000 or €12,500.

a) The seller has given the buyer an at-the-money put option.

b) The seller has given the buyer an at-the-money call option.

c) Both a) and b) are correct

d) None of the above XYZ Corporation, located in the United States, has an accounts payable obligation of ¥750 million payable in one year to a bank in Tokyo. The current spot rate is ¥116/$1.00 and the one year forward rate is ¥109/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the United States. XYZ can also buy a one-year call option on yen at the strike price of $0.0086 per yen for a premium of 0.012 cent per yen. The future dollar cost of meeting this obligation using the forward hedge is

a) $6,450,000.

b) $6,545,400.

c) $6,653,833.

d) $6,880,734. Suppose that the exchange rate is €1.25 = £1.00. Options (calls and puts) are available on the Philadelphia exchange in units of €10,000 with strike prices of $1.60/€1.00. Options (calls and puts) are available on the Philadelphia exchange in units of £10,000 with strike prices of $2.00/£1.00. For a U.S. firm to hedge a €100,000 payable,

a) buy 10 call options on the euro with a strike in dollars.

b) buy 8 put options on the pound with a strike in dollars.

c) sell 10 call options on the euro with a strike in dollars.

d) sell 8 put options on the pound with a strike in dollars.

I can help you with these questions. I am currently working on the same If possible, kindly let me know the course/assignment this is related to.

P.S. As you are new to JustAnswer, kindly keep refreshing this page or check your email account you registered with, for any reply notifications. This is important as it will only help us speed up our conversation but avoids any delays in service. Further, another important thing, i would like you to know is, you need to click "Rate the answer" after i provide you answer so that i get paid a %age of deposit , you made with this site. That is only way i get credited by the site, as an expert answering you.

THIS ANSWER IS LOCKED! You can view this answer by clicking here to Register or Login and paying AU$4. If you've already paid for this answer, simply Login.

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.

JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.

Web sites like justanswer.com/legal ...leave nothing to chance.

Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.

Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.

I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.Freshfield, Liverpool, UK

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.GPHesperia, CA

I couldn't be more satisfied! This is the site I will always come to when I need a second opinion.JustinKernersville, NC

Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. EstherWoodstock, NY

Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. RobinElkton, Maryland

He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here.DianeDallas, TX