Question 1) Assume the bid rate of a Swiss franc is $.57 while the ask rate is $.579 at Bank X. Assume the bid rate of the Swiss franc is $.560 while the ask rate is $.566 at Bank Y. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with?
- $7,067.
- $8,556.
- $10,114.
- $12,238.
Question 2) Any restructuring of operations that _______ the difference between a foreign currency's inflows and outflows may _______ economic exposure.
- reduces; increase
- increases; reduce
- reduces; reduce
- A and B
- none of the above