Suppose one observed the following direct spot quotations in New York and London
ID: 2757062 • Letter: S
Question
Suppose one observed the following direct spot quotations in New York and London, respectively: 1.2500 60 and .8000 50. Arbitrage profits per $1 million equal
$637
$0
$1,268
$4,492
5 points
QUESTION 2
In the interbank market dealers quote the forward rate only as a discount from, or premium on, the spot rate, and this forward differential is known as the:
discount rate
premium rate
outright rate
swap rate
5 points
QUESTION 3
For a US trader, an interbank quotation of $1.4631/£ is in
European terms
non-conventional terms
indirect terms
direct terms
5 points
QUESTION 4
An increase in the current account deficit will place _____ pressure on the value of the home currency, other things equal.
upward
downward
no
upward or downward depending on the size of the de
$637
$0
$1,268
$4,492
Explanation / Answer
Answer1
Answer is Option 2 = $0 As it is a currency arbitrage
Currency arbitrage forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades.
QUESTION 2
In the interbank market dealers quote the forward rate only as a discount from, or premium on, the spot rate, and this forward differential is known as the:
Answer:- swap rate
QUESTION 3
For a US trader, an interbank quotation of $1.4631/£ is in
Answer is Indirect terms as it it a exception for euro currency
QUESTION 4
An increase in the current account deficit will place _____ pressure on the value of the home currency, other things equal.
Answer:- Downward