The fact that we can derive the British pound/Polish zloty exchange rate, say, f

Question

The fact that we can derive the British pound/Polish zloty exchange rate, say, from the dollar/pound rate and the dollar/zloty rate follows from ruling out a potentially profitable arbitrage strategy known as triangular arbitrage. As an example, suppose that the British pound price of a zloty was below the British pound price of a dollar times the dollar price of a zloty, as depicted by the hypothetical data in the following table. Exchange Rate British pound price of a zloty British pound price of a dollar U.S. dollar price of a zloty Value 3.5 1.40 4.50 Using $100 to purchase the Polish currency directly would obtainzlotys. (Round your answer to one decimal place.) Enter your answer in the answer box and then click Check Answer. parts remaining Clear A Check Answer

Explanation / Answer

a.

You have totally = $100

Exchnage rate between Zloty and US dollar = 4.50 Zloty per US dollar.

Total Zloty you receive = $100 × 4.50

= 450 Zloty.

Total Zloty you receive is 450 Zloty.

b.

Exchnage rate between Swiss Franc and Dollar = $0.9643 per Franc

Total Franc you receive = $100 / 0.9643

= 103.70 Franc

Total Franc you receive you receive is 103.70.

c.

Company import Steel from outside and most of sale in Japan only. So if Japanese Yen Depreciate then company will incur loss.

Option (A) is correct answer.

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