If you find that the British pound to New Zealand dollar were trading at 0.49, what would you do to earn a riskless profit?
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1. The New Zealand dollar to U.S. dollar exchange rate is 1.36, and the British pound to U.S. dollar exchange rate is 0.62. If you find that the British pound to New Zealand dollar were trading at 0.49, what would you do to earn a riskless profit?
2. Short term interest rates are 2% in Japan, and 4% in the United States. The current exchange rate is 120 yen per dollar. If you can enter into a forward exchange rate of 115 yen per dollar, how can you arbitrage the situation?
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The expert examines the British pound to New Zealand dollar if it were trading at 0.49.
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1. The New Zealand dollar to U.S. dollar exchange rate is 1.36, and the British pound to U.S. dollar exchange rate is 0.62. If you find that the British pound to New Zealand dollar were trading at 0.49, what would you do to earn a riskless profit?
To arbitrage in this currency market, we will start with NZD, say 1 NZD. exchange the 1 NZD to USD ...
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