Question

An Indian importer observes the following quotes in the interbank market: Direct Quote in India: 1 USD = ₹83.50 Indirect Quote in India: 100 INR = 1.22 USD             Based on these quotes, which of the following statements is mathematically accurate regarding the relationship between these two rates?

A The quotes are perfectly aligned, and no arbitrage opportunity exists.
B The Indirect Quote implies a USD rate of ₹81.97, suggesting the USD is undervalued in the indirect market.
C The Indirect Quote implies a USD rate of ₹83.50, maintaining the Law of One Price.
D The Direct Quote suggests that 100 INR should be worth 1.19 USD.
E The Indirect Quote is exactly the reciprocal of the Direct Quote.
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