The market exchange rates are US$1.60/€1 and US$2.00/£1. A bank quotes a cross rate of £1/€1.20....
The market exchange rates are US$1.60/€1 and US$2.00/£1. A bank quotes a cross rate of £1/€1.20. How much profit can a trader earn with $1,000,000 to invest?
Multiple Choice
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None of the options.
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$41,667
-
$50,000
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$60,333
-
$40,000
Homework Answers
Solution:
Amount available with trader = $1000000
1€=$1.60
$10,00,000/$1.60= €6,25,000
€1.20= 1 pound
€6,25,000/€1.20= pound 5,20,833.33
1 pound = US$2
Pound 5,20,833.33*$2= $10,41,666.67
Profit = $10,41,666.67- $10,00,000= $41,666.67
Option A is correct i.e. $41,667
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The market exchange rates are US$1.60/€1 and US$2.00/£1. A bank
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