Question

My name is Maurice. I have $8,000 in FXCM (Foreign Exchange Market). I am considering converting dollar to Euro now. The rate I apply now (first exchange rate conversion) is 0.88 Euro/$. In the evening, I bet the rate will be favorable to me. Let's assume there are no service fees about this process. If I strongly believe in my speculation, and I want to make at least $600 profit from this process, what should be the exchange rate for the 2nd conversion to meet my profit target

Answer 1

New rate must be less than or equal to 0.82 euro per dollar

Step-by-step explanation:

Less than or equal to 0.82 Euro/$

Reason: Current rate = 0.88 Euro per dollar

This gives Maurice = $8000 x 0.88 = 7040 euros

Profit needed = $600

This means upon second conversion, Maurice must get $8000+$600 = $8600

Now, let us suppose morning rate is 0.89 euro per dollar

This gives 7040/0.89 = $8186 (not favorable)

If morning rate is 0.82 euro per dollar

This gives 7040/0.82 = $8585 (close to $8600)

Thus, new rate must be less than or equal to 0.82 euro per dollar