True O False QUESTION 14 One year ago today, you purchased 50.000 euros from a d

Question

True O False QUESTION 14 One year ago today, you purchased 50.000 euros from a dealer that quoted the euro at $1.1136-42. Today, you sold all your euros to a dealer with the following quotes $1.1038-44. Find your profitloss in terms of dolars. Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols or words when QUESTION 15 Which of the following is a characteristic of nations in a fixed exchange rate system? O Their central banks generally do nat particpate in foreign exchange markets Ther central banks parlicpate frequently in foreign exchange markets nnation does not exist in these nations O None of the above Cliek Sove and Stubmit to suce and subrmir. Cbck Save All Arausers to suce al anauers

Explanation / Answer

At time of pourchase bid porice of Euro is $1.1136 and ask price is $1.1142 poer Euro. an investor can purchase Euro at ask rate from dealer and sale at bid price.

Total Dollar price of Euro at time of purchase = 50,000 * 1.1142

= $55,710

after one year bid rate 1.1038 and ask rate is $1.1044

Sale price of euro = 50,000 * $1.1038

= $555,190.

Total Loss = $55,710 - $55,190

= $520

Total loss in dollar term is $520.

2.

A nation with fixed exchange rate of it currency is possible only when its centeral bank must participate frequently in foreign exchange market.

Option (B) is correct answer.

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