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Calculation of the Exchange Rates for Major International Cu

7.1 Find a Web site that shows exchange rates for all major international currencies. At the time of writing, XE.com and oanda.com are examples of such sites.

A. Is the British Pound shown? If not, why not? (You might have to do some investigation online if you're not familiar with the history of European currency.)

B. What is the exchange rate between the Canadian dollar and the US dollar?

C. XE.com also allows you to see exchange rates for gold ounces (under "more currencies available"). What does XE.com (or a similar site) say 1 ounce of gold is worth in Canadian dollars? In US dollars? What does this imply is the exchange rate between Canadian dollars in US dollars? Is this the same as your answer to part B.?

D. If you saw that the US dollar price of gold was one dollar less than the price shown, how could you use that information to make an arbitrage profit?

7.2 A. Fill in the following table using XE.com or a similar foreign-currency quote Web site. In each cell, record the number of units of the currency stated in the first cell of the row that would be required to buy one unit of currency as stated in the column heading.

For example, if you sold US$1, how many European Euros could you buy?

B. Why are the numbers in the Japanese ¥ column so much higher than the numbers in the other rows?

Solution Summary

7.1 Find a Web site that shows exchange rates for all major international currencies. At the time of writing, XE.com and oanda.com are examples of such sites.

A. Is the British Pound shown? If not, why not? (You might have to do some investigation online if you're not familiar with the history of European currency.)

B. What is the exchange rate between the Canadian dollar and the US dollar?

C. XE.com also allows you to see exchange rates for gold ounces (under "more currencies available"). What does XE.com (or a similar site) say 1 ounce of gold is worth in Canadian dollars? In US dollars? What does this imply is the exchange rate between Canadian dollars in US dollars? Is this the same as your answer to part B.?

D. If you saw that the US dollar price of gold was one dollar less than the price shown, how could you use that information to make an arbitrage profit?

7.2 A. Fill in the following table using XE.com or a similar foreign-currency quote Web site. In each cell, record the number of units of the currency stated in the first cell of the row that would be required to buy one unit of currency as stated in the column heading.

For example, if you sold US$1, how many European Euros could you buy?

B. Why are the numbers in the Japanese ¥ column so much higher than the numbers in the other rows?

$2.19