How to make money using exchange rates.?

Question

You have 1000 dollars

dollar per euro = 1.20

euro per british pound= 6.00

British pount per dollar=3.20

Answer 1

buy whatever will be worth more , relative to other currencies when you sell it FROM THIS POINT IN TIME- WHEN YOU BUY, 'past performance is no guarantee of future returns',

as the disclaimer states.  So if you have a good crystal ball...........

Answer 2

Your numbers must be hypothetical.

I'll take today's values (6/16/08):

1 $US buys 0.650703 euros.

1 euro buys 0.788264 British pounds

1 british pound buys 1.94959 $US

If you have $1,000, you can buy 650.703 euros.

Your 650.703 euros can buy 512.9257 pounds.

Your 512.9257 pounds can buy $999.9949.

Assuming you can trade currency without costs, you will make half a cent on $1,000.

Try another, more exotic trade:

$1,000 will buy 107,750 Sri Lankan Rupees.

Your Rupees will buy 1,043,999.4475 Korean Won.

Your Won will buy 4,851.4654 Danish Krone.

Your Krone will buy $999.9064.

You'll make almost 10 cents per $1,000 on this regime... assuming there's no cost to trade.

Try it for yourself:

Answer 3

Wrong - you have 3 currencies USD / GBP / EUR

Exchange rates are:

USD/EUR=1.20

EUR/USD=0.8333=(1/1.20)

EUR/GBP=6.00

GBP/EUR=0.1667=(1/60)

GBP/USD=3.20

USD/GBP=0.3125=1/3.20)

There is 4 conversion chains of your 1'000 dollars

a) USD -> EUR -> GBP -> USD

b) USD -> GBP -> EUR -> USD

c) USD -> GBP -> USD (useless because conversion even)

d) USD -> EUR -> USD (useless because conversion even)

a) 1'000 USD => 833.9(3) EUR => 138.8(8) GBP => 444.4(4) USD - you will loose -555.56 USD (1'000-444.44= 555.56)

b) 1'000 USD => 312.5 GBP => 1'875 EUR => 2'250 USD - you will 'earn' +1'250 USD (2'250-1'000=1'250)

So you should convert following way USD=>EUR=>GBP=>USD to have profit of $+1'250 per first wave of your initial $1'000.

Following excahnge cycles will give you these results:

Stage......$ Result

0....................1 000

1....................2 250

2....................5 063

3...................11 391

4...................25 629

5...................57 665

6.................129 746

7.................291 929

8.................656 841

9..............1 477 892

10............3 325 257

11............7 481 828

12..........16 834 112

13..........37 876 752

14..........85 222 693

15........191 751 059

16........431 439 883

17........970 739 737

18.....2 184 164 409

19.....4 914 369 920

20....11 057 332 321

21....24 878 997 722

22....55 977 744 875

23...125 949 925 968

24...283 387 333 428

25...637 621 500 214