Answer to Question #267088 in Microeconomics for DEE

Question

The following information is available to a Zambian trader:

i. Percentage spread given for Zambian kwacha per US dollar is 0.1%. The ask rate for Zambian kwacha per C$ dollar is K9.526

ii. Canadian dollars per US dollar                 C$ 1.2780/US$

iii. Kwacha per US dollar                                 K8.524/US$

a)  Calculate the bid rate                                                                                

b)  Determine if there is any opportunity for arbitration                             

c)  Explain How a Zambian trader with K1, 200,000 can use this amount to benefit from the inter market arbitrage?                                                              

What will be the profit or loss for the trader? 

Answer 1

Currency INR (Indian rupees)

Conversion rate=1 peso=1.54 INR

So formula will be

Y=1.54x

Where X=peso and y=INR