Geographical Arbitrage Sums

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(1)   Bank A                  GBP USD                   1.6920             1.6940

Bank B                  GBP USD                   1.6880             1.6900

Calculate Arbitrage, if any.

(Ans.: 1,183)

 

(2)   Bank X                  EUR CHF                   1.4790             1.4820

Bank Y                  CHF EUR                   0.6700             0.6720

Calculate Arbitrage, if any.

(Ans.: 4,113)

 

(3)   City Bank              CAD AUD                 0.9530             0.9550

Barclays                CHF EUR                   1.0500             1.0520

Calculate Arbitrage, if any.

(Ans.: 650)

 

(4)   HSBC                   USD INR                    50.00               50.20

SBI                        100 INR USD               2.01                 2.02

Calculate Arbitrage, if any.

(Ans.: 5,000)

 

(5)   SBI offers                         USD INR                                52

Amex Bank offers                        100 INR USD                         1.9279

Calculate Arbitrage, if any.

(Ans.: 2,508)

 

(6)   Standard Chartered offers 1 Euro = Pound 0.80 in Spot Market. HSBC just reciprocates the same rate to quote 1 Pound in terms of Euro; by inversing it.

(i)           Calculate the rate quoted by HSBC

(ii)         As per forex dealer of Standard Chartered; Euro is at 2% premium per annum. What will be rate for 1 Euro after 1 year as per Standard Chartered?

(iii)       As per forex dealer of HSBC; Pound is at 2% discount per annum. What will be rate for 1 Pound after 1 year as per HSBC?

(iv)       Is there any arbitrage possibility on 1 year rates of the two banks? Calculate it for a million of currency amount.

(Ans.: (i) 1.25 (ii) 0.8160 (iii) 1.2250 (iv) 400)

 

(7)   Chess Bank offers $ 1 = £ 0.625 in Spot Market.

Sakura bank just reciprocates the same rate to quote £ 1 in terms of $; by inversing it.

(i)           Calculate the rate quoted by Sakura Bank

(ii)         As per forex dealer of Chess Bank; $ will be at 2% premium per annum. What will be rate for $ 1 after 1 year as per Chess Bank?

(iii)       As per forex dealer of Sakura Bank; £ will be at 2% discount per annum. What will be rate for £ 1 after 1 year as per Sakura Bank?

(iv)       Is there any arbitrage possibility on 1 year rates of the two banks? Calculate it for a million of currency amount.

(Ans.: (i) 1.60 (ii) 0.6438 (iii) 1.5520 (iv) 900)

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