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Spot Exchange Rates and Exchange Rate Arbitrage

Country Contract $/Foreign Currency
Canada-dollar Spot .8437
30-day .8417
90-day .8395
Japan-yen Spot .004684
30-day .004717
90-day .004781
Switzerland Spot .5139
30-day .5169
90-day .5315

Question 1. (Spot exchange rates) An American business pays $10,000, $15,000, and $20,000 to suppliers in, respectively, Japan, Switzerland, and Canada. How much, in local currencies, do the suppliers receive?

Question 2. (Exchange rate arbitrage)You own $10,000. The dollar rate in Tokyo is 216.6743. The yen rate in New York is given in the preceding table. Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is the gain (loss) in dollars?

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Please see the attached Excel file:
COUNTRY-CURRENCY CONTRACT $/Foreign Currency
Canada - dollar (CAD) Spot 0.8437
30 day 0.8417
90 day 0.8395

Japan - yen (JPY) Spot 0.004684
30 day 0.004717
90 day 0.004781

Switzerland - franc (CHF) Spot 0.5139
30 day 0.5169
90 day 0.5315

US dollars= USD
Yen= JPY
Swiss Franc= CHF

"Question 1. (Spot exchange rates) An American business pays $10,000, $15,000, and $20,000 to ...

Solution Summary

Answers 2 questions on Spot exchange rates, Exchange rate arbitrage.

$2.19