Assume that the following spot exchange rates exist today: £1 = $1.50 C$1 = $0.75 £1 = C$2 Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to earn a profit on $100,000? Explain all intermediate transactions involved.

Assume that the following spot exchange rates exist today: £1 = $1.50 C$1 = $0.75 £1 = C$2 Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to earn a profit on $100,000? Explain all intermediate transactions involved.

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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4. Assume that the following spot exchange rates exist today:
£1 = $1.50
C$1 = $0.75
£1 = C$2
Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to
earn a profit on $100,000? Explain all intermediate transactions involved.

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Suppose the Japanese yen exchange rate is ¥116/$ and the British pond exchange rate is $1.27/£. a) What is the yen to pound cross-rate? b) Suppose that a bank gives you a quote of ¥156/£. Is there an arbitrage opportunity here? If so, explain how to take advantage of the mispricing.
D3)
Use the following exchange rates to calculate the cross rates: EURUSD = 1.0500 GBPUSD = 1.2505 AUDUSD = 0.7050 USDJPY = 134.75 USDMXN = 19.2585 USDCAD = 1.2565 A: EURJPY B: CADMXN C: EURGBP D: AUDJPY E: CADJPY
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Use the following exchange rates to calculate the cross rates: EURUSD = 1.0500 GBPUSD = 1.2505 AUDUSD = 0.7050 USDJPY = 134.75 USDMXN = 19.2585 USDCAD = 1.2565 EURJPY = CADMXN = EURGPB = AUDJPY = CADJPY =

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