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Pastimes : Let's Talk About Our Feelings!!! -- Ignore unavailable to you. Want to Upgrade?

To: nihil who wrote (33832)	4/6/1999 7:12:00 AM
From: On the QT	Respond to of 108807

"I add another puzzle, with an air of international business. A sailor buys a beer for $.05 US (very old story) in Detroit, and pays for it with a Washington (U.S. dollar). Owing to the $.05 difference in bid and ask in foreign exchange rates, the $US is worth $1.05 Canadian (, so the Bartender gives him a $C (a Loonie) in change." Actually the sailor used a U.S. Dollar to buy a US beer. So the dollar was actually worth .95 cents (US)$1.00-.05=.95 For every .20 American one gets extra .01 Canadian so the .95 should have brought back in Canadian .20(.05)=+.01 =.21 .20(.05)=+.01 =.21 .20(.05)=+.01 =.21 .20(.05)=+.01 =.21 .15(.05)=+.0075 =.1575 .95 (05)=+.0475 = .9975 Canadian At this point we see that the bartender should have returned in Canadian money .9975 or 99 and ¾ cents.Obviously he did not. He returned 1.00 C so the sailor benefited by .0025 cents or 1/4 of a Canadian cent. "The sailor walks across the bridge to Canada and buys a $.05 C beer and pays with the Loonie. Owing to a $.05 bid and ask difference, the Loonie is worth $1.05 U.S. in Windsor, and the barkeep gives him a Washington in change." Actually, the sailor has a Canadian dollar which I take it is called a Loonie, he is buying a Canadian beer. If that is true and the Loonie also brings in an extra .01 US for every .20 C (talk about arbitrage!)1.00 C-.05 C=.95 C For every .20 Canadian, one gets .01 extra American so the .95 should have brought back in American .20(.05)=+.01 =.21 .20(.05)=+.01 =.21 20(.05)=+.01 =.21 .20(.05)=+.01 =.21 .15(.05)=+.0075 =.1575 .95 (05)=+.0475 = .9975 At this point,we see that the bartender should have returned in American money .9975 or 99 and ¾ cents. Obviously he did not and could not. The sailor benefited by .0025 cents or 1/4 of an American cent. "The sailor, sensing he is on to a good cheap drunk walks back across the bridge to his original bar and buys another beer with his Loonie and gets a Washington in change --- usw. He ends up drunk as a skunk with his original U.S. dollar bill, is arrested by the Shore Patrol and severely beaten. Problem: Who paid for the beer?" Well Nihil,If I understand the puzzle correctly, each bill the American and the Canadian, appreciates by 5% when converted into the currency of the other country. Not knowing too much about this, it would seem that all one had to do is exchange money all day and keep appreciating ones fortune! Other than the remarkable nature of the exchange rate set up,the bartender's inaccurate change making, the sailor actually paid for the beer! Especially, considering all that damage to his body, he probably needs some physical and mental therapy as well! Regards,QT PS Thought I save this for last:) Nihil, by the way, when the sailor went back to his original bar, an American one in Detroit,this time he paid with a Loonie not an American dollar. So when the bartender gave him an American dollar in exchange, he violated the "exchange rules" and took the worst of it monetarily. The Loonie in Detroit is only worth .952380 American cents. Therefore, the bartender treated the (I suspect) now drunk sailor to a free beer and the difference between 1.00-.95238 = .04762 American cents. Which if possible, he could have taken to Canada to buy a beer! (Love to see the bartender's face. On second thought , I do not care to at all:) All great stuff. Enjoyed it! Thread: No more puzzles please, won't answer them anymore. No time. Black- Scholes and Beyond and QT locked in mortal combat...far from my expertise(then again I have none) I, thus far, am getting my butt kicked and brain drain, big time! Probably will have have to shelve it and get on to other things… hard to accept my own limitations and inability to understand many things, just don't have the background and intelligence, much less wanting to understand enough to improve on it. Sometimes it all gets rather lonely and frustrating. Wonder what that is all about?