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What is the eur-gbp cross rate

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Reference no: EM133118629

Course: International Finance  Instructions: Answer ALL questions, showing workings clearly.  

1. Assume you obtained the following currency rates:

Spot rate EUR/USD               EUR0.9258/USD

Spot rate USD/GBP                USD1.3175/GBP

What is the EUR/GBP cross rate, given the above rates?

2. Marshall and Patrice have been dating for about a year. Marshall is from Key West, Florida while Patrice is from Madrid, Spain. Marshall has planned a surprise visit to Spain to mark their first anniversary since they met.  Marshall has USD 3,750 for his trip.  He will convert USD3,000 to YEN for the couple's trip to Shanghai Disney and the balance to EUR. The currency exchange rate he received is EUR1.2125/USD. He also got the rate of USD0.1617/YEN.

Required:

(a)What is the EUR/YEN cross rate?

(b)How much YEN will Marshall get for the USD3,000?

3. Maria Binder, does trades from her 10th floor corner office in Barcelona, Spain. She has eight hundred and fifty thousand euros (€850,000) to be used for a trade. She has obtained the following currency rates and believes that she could trade at those rates for an arbitrage gain. 

Verde Bank                 GBP/EUR                   £1.0145/€

Azul Bank                   EUR/USD                   €1.0950/$

Rojo Bank                   GBP/USD                   £0.8755/$

Required: Show whether triangular arbitrage gain may be used to produce a profit, given the above rates.

Reference no: EM133118629

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