Economics

1. Suppose at 11am this morning, the following rates are obtained from the FX markets:
In New York €1 =$1.09251
In Frankfurt £1 = €1.1234
In London $1 = £0.85
(a) Determine if there is a currency arbitrage opportunity in this 3-currency situation.
(b) If there is an arbitrage opportunity to be exploited, show how you may be able to capture this profit. YOU NEED TO ILLUSTRATE YOUR PROFITABLE ROAD MAP WITH A NUMERICAL EXAMPLE.

Explanation:

A business plan states formally the goals of the company; it shows the tasks that must be performed to reach those big goals and shows the financlal ways that could or should be used to accomplish the goals.

The business plan permits to understand how the business work and, thus, gives the basis for future actions. It is a tool of organization, direction, and communication, and the basis to develop a financial plan. In brief words: what the company wants to do and how it inteds do it.

A. Businesses do not need to document a business plan.

FALSE.

The business plan must be formal, not just an idea or view in the mind of the owners or managers, as such it must be documented.

B. Established businesses do not create a business plan.

FALSE.

Business plans change with time. As much as starting business, established business must periodically review the conditions and goals and update, or even importantly change the business plan.

C. A business plan is a business’s roadmap for the future.

TRUE.

Business plan gives direction, the ways to reach the goals, the tasks to be performed.

D. A business plan guarantees a business’s success.

FALSE.

Success is never guaranteed. Risk is intrinsic to all the human activities. Complexity of human interactions and changing circumstances do not permit to guarantee that a plan guarantees the success. That is why business plans must be revised and ajusted or changed to adapt the goals and the actions to be the most sucessfull possible, but without guarantees.

answer; no individual buyer or seller has any significant impact on the market price;