About the spot exchange rate

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Reference no: EM13730439

Assume the spot exchange rate between South Korean Won (?) and Japanese Yen (¥) at 9.4 ?/¥, the spot exchange rate between Thai Bhat and Yen is 3.3 ¥/Bhat and that you can buy or sell either currency at the quoted exchange rate (zero bid-offer spread).

a. Two years ago the Bhat – ¥ exchange rate was 3.6 ¥/Bhat. From the perspective of a Thailand-based investor, what is the percentage change in the value of the Japanese Yen over the last two years?

b. How many Won would it take to buy one Thai Bhat for value spot day?

c. A Thai company with operations in South Korea is willing to exchange 1,000,000 Thai Bhat for South Korean Won at 35 ?/Bhat (i.e. they are willing to buy or sell Bhat for Won at 35 ?/Bhat). Is there a potential arbitrage? If I start with 1,000,000 Thai Bhat, what trades do I execute to make a profit? If each Bhat is worth 0.03 US$ (exactly 3 cents), what is the amount of my profit in US$?

Reference no: EM13730439

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