How transactions costs affect foreign currency exchange

Assignment Help Macroeconomics

Reference no: EM131479788

Question: Consider how transactions costs affect foreign currency exchange. Rank each of the following foreign exchanges according to their probable spread (between the "buy at" and "sell for" bilateral exchange rates) and justify your ranking.

a. An American returning from a trip to Turkey wants to exchange his Turkish lira for U.S. dollars at the airport.

b. Citigroup and HSBC, both large commercial banks located in the United States and United Kingdom, respectively, need to clear several large checks drawn on accounts held by each bank.

c. Honda Motor Company needs to exchange yen for U.S. dollars to pay American workers at its Ohio manufacturing plant.

d. A Canadian tourist in Germany pays for her hotel room using a credit card.

Reference no: EM131479788

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