SIDORE 10 Points Cio 8 of 3 Asume the bid rate of a Singapor

SIDORE 1.0 Points Cio 8 of 3 Asume the bid rate of a Singapore dollar is $.40 while the ask rate is $.41 at Bank X. Assume the bid rate of a Singapore dolar i $42 while the ask rate is $.425 at Bank Z. Given this information, what would be your gain i you Une 51,000.000 and execute locational arbitrage? That is, how much will you end up with over and above t S1,000 000 you started with? OA $11,764 B $1194 les Selection Mark for Fevien What\'s This?

Solution

Answer(18): 1000000/.41 = $2439024

2439024 * .42 = $1024390

Gain = $1024390 - $1000000

Gain = $24390 Option \"C\" is correct.

Answer(19): Downward and Premium so option \"A\" is correct.

Answer(20): If interest rate parity exist, \"Covered interest arbitrage\" is not feasible. So option \"B\" is correct.

Answer(21): Deviations from PPP are reduced in long run. Option \"B\" is correct.

Answer(22): IRP suggests that a currency\'s spot rate will change according to interest rate diffrentials. Option \"C\" is correct.

Answer(23): Increase, reduce, appreciation. Option \"B\" is correct.