1. Cross Exchange Rate: Assume Poland's currency (the zloty) is worth $.17 and the Japanese yen is worth $.008. What is the cross rate of the zloty with respect to yen? That is, how many yen equal a zloty?
2. Interpreting exchange rate Quotations: Today you notice the following exchange rate quotation: (a) $1 = 3.00 Argentine pesos and (b) 1 Argentine peso = .50 Canadian dollars. You need to purchase100, 000 Canadian dollars with U.S. dollars. How many U.S. dollars will you need for your purchase?
3. Speculation: Diamond Bank expects that the Singapore dollar will depreciate against the U.S. dollar form its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist:
Currency for U.S. dollar lending Rate is 70% and borrowing rate is 7.2 %
Singapore dollars lending Rate is 22.0% and borrowing rate is 24.0 %
Diamond Bank considers borrowing 10 million Singapore dollars in the interbank market and investing the funds in U.S. dollars for 60 days. Estimate the profits (or losses) that could be earned form this strategy. Should Diamond Bank pursue this strategy?