Suppose the Japanese yen exchange rate is ¥78.47 = $1, and the British pound exc

Question

Suppose the Japanese yen exchange rate is ¥78.47 = $1, and the British pound exchange rate is £1 = $1.57. (Enter your answer as directed, but do not round intermediate calculations.) Required: (a) 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).)

Cross-rate ¥

(b) Suppose the cross-rate is ¥125 = £1. What is the arbitrage profit per dollar? (Round your answer to 4 decimal places (e.g., 32.1616).)

Arbitrage profit per dollar $

Explanation / Answer

a) 1 pound = 1.57 * 78.47 yen

= 123.1979

b) suppose 1 pound = 125 yen

Profit per dollar would be = 125 - 123.1979

= 1.8021 Yen

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