New York simultaneously calls Citibank in New York City and Barclays in London. The banks give the following quotes on the euro simultaneously. Citibank NYC Barclays London Bid: $0.7551 = €1.00 Bid: $0.7545 = €1.00 Ask: $0.7561 = €1.00 Ask: $0.7575 = €1.00 Using $1 million or its euro equivalent, show how the corporate treasury could make geographic arbitrage profit with the two different exchange rate quotes.

New York simultaneously calls Citibank in New York City and Barclays in London. The banks give the following quotes on the euro simultaneously. Citibank NYC Barclays London Bid: $0.7551 = €1.00 Bid: $0.7545 = €1.00 Ask: $0.7561 = €1.00 Ask: $0.7575 = €1.00 Using $1 million or its euro equivalent, show how the corporate treasury could make geographic arbitrage profit with the two different exchange rate quotes.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 8Q

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calls Citibank in New York City and Barclays in London. The banks give the following quotes on the euro simultaneously. Citibank NYC USD0.75622= EUR1.00 USD0.75662 = EUR1.00 Barclays London USD0.75160 = EUR1.00 USD0.75172= EUR1.00 Using $5.5 million or its euro equivalent, determine if and how the corporate treasury could make geographic arbitrage profit with the two different exchange rate quotes. (ECEU! Calculate the first arbitrage opportunity below: (Round to the nearest cent.) Arbitrage Strategy #1 Initial investment $ € 5,500,000.0
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