1 unit of Currency A costs 0.201 units of Currency B, 1 unit of Currency B costs 3.94 units ofCurrency C, and 1 unit of Currency A costs 0.798 units of Currency C. Assume that you arestarting out with 1,000,000 units of Currency A and that there are no transaction costs. How muchmoney will you make in one set of triangular arbitrage transactions? Round to the nearest unit ofCurrency A.Answer:xTake any two of those exchange rates and use algebra to figure out what the third one should be.Then use (Real - Should)/Should to find the amount by which that currency is mispriced. If it'soverpriced, then the percentage by which it's overpriced is equal to the percentage gain you'llmake doing one set of arbitrage trades. If it's underpriced, then you'll have to find out how muchthe other currency is overpriced and apply that percentage to 1,000,000 units of Currency A to getyour arbitrage gain. To check your work, you may want to then work out the actual trades on paperto see if you come up with the same answer.The correct answer is: 7652

A triangular arbitrage transaction takes place when the prices of three currencies are priced in…

1 unit of Currency A costs 0.201 units of Currency B, 1 unit of Currency B costs 3.94 units of Currency C, and 1 unit of Currency A costs 0.798 units of Currency C. Assume that you are starting out with 1,000,000 units of Currency A and that there are no transaction costs. How much money will you make in one set of triangular arbitrage transactions? Round to the nearest unit of Currency A.

1 unit of Currency A costs 0.201 units of Currency B, 1 unit of Currency B costs 3.94 units of Currency C, and 1 unit of Currency A costs 0.798 units of Currency C. Assume that you are starting out with 1,000,000 units of Currency A and that there are no transaction costs. How much money will you make in one set of triangular arbitrage transactions? Round to the nearest unit of Currency A.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Where does the $850 go?
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A computer costs $560 in the United States. The same model costs 640 in France. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar? Do not round intermediate calculations.
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Give typing answer with explanation and conclusion
A US dollar costs 1.30 Canadian dollar (CAD), but the same dollar can be purchased for 25.0 Mexican peso (MXN). If the MXN/CAD exchange rate is quoted as 18.0, there is an opportunity for triangular arbitrage. Starting from a dollar, the arbitrager will first buy (CAD MXN) with the dollar to obtain blanks and explain your answer." % of riskless arbitrage profit for each round. Fill in
Ay 2.
Assume the bid rate of a Canada dollar is A$.271 while the ask rate is A$.273 at Bank A. Assume the bid rate of the Canada dollar is A$.265 while the ask rate is A$.266 at Bank B. Given this information, what would be your gain if you use A$2,500,000 and execute locational arbitrage? That is, how much will you end up with over and above the A$2,500,000 you started with? Group of answer choices A$ 46,992 A$ 65,789 - A$ 65,789 A$ 18,315 - A$ 46,992
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