120 CHAPTER 3. SPOT MARKETS FOR FOREIGN CURRENCY
(a) If you accept these quotes, how manyeur,nzd, andgbpdo you have at
departure?
(b) If you return witheur300,nzd1,000, andgbp75, and the exchange
rates are unchanged, how manyusddo you have?
(c) Suppose that instead of selling your remainingeur300 once you return
home, you want to sell them in Great Britain. At the train station, you
are offeredgbp/eur0.66-0.68, while a bank three blocks from the station
offersgbp/eur0.665-0.675. At what rate are you willing to sell youreur
300? How manygbpwill you receive?- Abitibi Bank quotesjpy/eur155-165, and Bathurst Bank quoteseur/jpy
0.0059-0.0063.
(a) Are these quotes identical?
(b) If not, is there a possibility for shopping around or arbitrage?
(c) If there is an arbitrage opportunity, how would you profit from it?The following spot rates against thegbpare taken from the Financial Times of
Friday, February 2, 2007. Use the quotes to answer the questions in Exercises
3 through 5.Country Code midpoint change spread
Czech Rep czj 42.7945 +0.1868 616–273
Denmark dkk 11.30929 +0.0289 065–119
Euro eur 1.5172 +0.0039 168–175
Norway nok 12.3321 +0.0394 263–379
Russia rub 52.1528 – 0.0368 376–679
Switzerland chf 2.4531 +0.0040 522–540
Turkey ytl 2.7656 –0.0050 614–698Note:Bid-ask spreads show only the last three decimal places. When the ask seems to be
smaller then the bid, add 1000.- What are the bid-ask quotes for:
(a)czj/gbp?
(b)dkk/gbp?
(c) eur/gbp?
(d)nok/gbp?- What are the bid-ask quotes for:
(a)gbp/czj?
(b)gbp/dkk?
(c) gbp/eur?