Suppose the Japanese yen exchange rate is ¥79.47 = $1, and the British pound exc

Question

Suppose the Japanese yen exchange rate is ¥79.47 = $1, and the British pound exchange rate is £1 = $1.58. (Enter your answer as directed, but do not round intermediate calculations.)

What is the cross-rate in terms of yen per pound? (Do not include the yen sign (¥). Round your answer to 2 decimal places (e.g., 32.16).)

Suppose the cross-rate is ¥127 = £1. What is the arbitrage profit per dollar? (Round your answer to 4 decimal places (e.g., 32.1616).)

Suppose the Japanese yen exchange rate is ¥79.47 = $1, and the British pound exchange rate is £1 = $1.58. (Enter your answer as directed, but do not round intermediate calculations.)

Explanation / Answer

Exchange rate 1 yen = 1/79.47 $

1 pound = 1.58$

1 pound = 125.56 yen

B.1 pound is 127 yen

So 1 dollar is 127/1.58 yen =80.37

Profit per dollar is 80.37-79.47 = 0.9097 yen

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