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d.eon webapps, assessment takenaunch jsp ?course assessment da_34 24?&course; d= 79863 &content; QUESTION 9 Use the following to answer the next two questions You observed the following spot quotations for dollars and euros Bank X: $1.1033-37 Bank Y: $1.1032-38 Bank Z: $1.1029-32 Find the maximum arbitrage profit available (in terms of dollars) if you have 6 million dollars at your disposal. Round intermediate steps to four decimals and your final answer to two decimals 543.87 4352.16 O 4896.18 QUESTION 10 In order for the arbitrage opportunity to ted, bank Z's ask price must decrease. O False QUESTION 11 Triangular arbitrage opportunities occur when the actual cross rate equals the implied cross rate. True False Cliek Save and Submit to save and submit. Click Save All Ansiwers to save all answers Save All An 3 74 F7Explanation / Answer
BANK
Q.09) As it is evident from the table that the ask rate of Bank Said is least. Therefore it is profitable to buy euros from Bank Z
Therefore, 6 million dollars will get converted to euros @ 1€ = $1.1032
=> 6 million dollars= € 5438723.7128
Next for converting euros to dollars, to attain maximum arbitrage gain we need to convert with the bank having highest bid rate i. e., Bank X@ 1€=$ 1.1033
=> €5438723.7128= $ 6000543.8724
Therefore, Arbitrage gain = $ 6000543.8724 - $ 6000000 = $ 543.872
Q.10) The Ask rate for Bank Z is the least, hence it was used for calculating arbitrage gain. Any further decrease in the ask rate of Bank Z would lead to an increase in the Arbitrage gain provided other rates remain unchanged. Hence Hence the given statement in Q.10 is False.
Q.11) Triangular Arbitrage occurs only when there is a difference between the Actual cross rates and the Implied cross rates hence the given statement is False.
BANK
Bid rate Ask rate X 1.1033 1.1037 Y 1.1032 1.1038 Z 1.1029 1.1032Related Questions
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