Assume the Following Information for a Bank Quoting on Spot

question 35

Multiple Choice

Assume the following information for a bank quoting on spot exchange rates: Based on the information given, as you and others perform triangular arbitrage, what should logically happen to the spot exchange rates?

• A) The Singapore dollar value in U.S. dollars should appreciate, the pound value in U.S. dollars should appreciate, and the pound value in Singapore dollars should depreciate.
• B) The Singapore dollar value in U.S. dollars should depreciate, the pound value in U.S. dollars should appreciate, and the pound value in Singapore dollars should depreciate.
• C) The Singapore dollar value in U.S. dollars should depreciate, the pound value in U.S. dollars should appreciate, and the pound value in Singapore dollars should appreciate.
• D) The Singapore dollar value in U.S. dollars should appreciate, the pound value in U.S. dollars should depreciate, and the pound value in Singapore dollars should appreciate.

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Definitions:

Noncash Investing

Refers to investment transactions that do not involve immediate cash flows, such as exchanging one asset for another or acquiring assets through the issuance of shares.

Increase Or Decrease

Terms used to describe a change in value or quantity, either going up (increase) or going down (decrease).

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue, indicating the company's financial performance over a period.

Net Cash Flow

The difference between a company's cash inflows and outflows within a given period, indicating the company's cash liquidity.