Question

You are an international shrimp trader. A food producer in the Czech Republic offers to pay you 2.2 million Czech koruna today in exchange for a​ year's supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 3.2 million Thai baht today. If the current competitive market exchange rates are 25.36 koruna per dollar and 41.06 baht per​ dollar, what is the value of this exchange to​ you?

Answer 1

Answer: The value of this exchange is $8,816.05.

Explanation:

The problem is dealing with a simple case of arbitrage of exchange rates: Lets assume that

k = koruna

b = baht

Step 1:

Sales Revenue = k2,200,000

(To get USD amount : $\frac{2,200,000}{25.36}= 86,750.7886$

Purchase Cost = b3,200,000

(To get USD amount : $\frac{3,200,000}{41.06}= 77,934.7297$

Step 2:

Profit = Sales Revenue - Purchase cost

         = $86,750.7886 - $77,934.7297

         = $8,816.0589

The value of this exchange is $8,816.05.