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Homework answers / question archive / 1 The USD/SGD spot exchange rate is 0
1 The USD/SGD spot exchange rate is 0.625, and the CAD/USD spot rate is 1.35. Determine the SGD/CAD spot rate to eliminate any triangular arbitrage profit (loss). O none of the above O 1.185 O 0.463 2.160
2 Assume the current U.S. dollar- TRY spot rate is 6,60TRY/$. Further, the current nominal 180-day rate of return in Turkey is annually 8% and 2% in the United States. What is the approximate forward exchange rate for 180 days? (Assuming TRY is home currency) Lütfen birini seçin: a. 6.41 TRY/$ a b. 6.80 TRY/$ 16 c. 7.00 TRY/$ d. 6.99 TRY/$ Uyg Kalai
3 i?aretlenmi? P Soruyu i?aretle Which one is wrong about the impact of rising EU income on the value of Turkish Lira (TL) as oppose to Euro? Lütfen birini seçin: a. TL-Supply Curve shifts to left due to decreased supply b. TL-Supply Curve remains unchanged c. Value of TL appreciates d. TL-Demand curve shifts to right due to increased demand
1 Solution :
The spot rate to eliminate any triangular arbitrage between a pair of currencies is the cross exchange rate between the currencies.
As per the information given in the question we have
USD / SGD = 0.625 ; CAD / USD = 1.35
The spot rate to eliminate any triangular arbitrage shall be the cross exchange rate i.e., SGD/CAD spot rate.
The SGD / CAD Spot rate can be calculated as = ( SGD/ USD ) * ( USD/CAD )
= ( 1 / ( USD / SGD ) ) * ( 1 / ( CAD / USD))
= ( 1 / 0.625 ) * ( 1 / 1.35 )
= 1.6 * 0.740741
= 1.185186
= 1.185 ( When rounded off to three decimal places )
Thus the SGD / CAD Spot rate to eliminate any triangular arbitrage profit ( loss ) is = 1.185
The solution is Option 2 = 1.185
2
We know that,
Ff/d = Sf/d * (1+ if * days / 360) / (1+id * days /360)
Ff/d (forward exchange rate) = 6.6 * (1+0.08*180/360)/ (1+0.02*180/360)
= 6.80 TRY/$ Answer
The option B is correct.
3
Answer>
Supply Curve - consists of people selling turkish lira
Demand curve - consists of people buying turkish lira by exchanging other currencies
Given that Eu income rises, the demand to buy turkish lira would increase, keeping other factors constant. hence option d is right
since demand increases, the supply demand equilibrium shifts, hence the value of tl increases. hence option c is right
if other factors are constant, increase in eu income does not change supply of turkish lira, hence option b is also right.
hence the supply curve doesn't change. hence the correct choice is option A
