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1) You find that the exchange rate between euro and U.S. dollar has been changed from Swfr1.20/$ five years ago to Swfr0.85/$ this year. What is the percentage change of dollar? What is the percentage change of the Swiss franc?

2) You receive the following quotations from a local bank.

$1.25/euro and $1.65/BP

What is the cross rate between the euro and BP?

3) Suppose an interbank trader noticed the following quotations:

S0 = peso12.5/$, F1 = peso13.0/$; iUS = 0.5% and iMexico = 6.0%.

What is the arbitrage-free forward rate? Is there an arbitrage opportunity? If so, specify all the transactions necessary to make an arbitrage profit?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92663513

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