Suppose the following exchange rate quotations are available: Citibank quotes U.S. dollars per

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
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Suppose the following exchange
rate quotations are available:
Citibank quotes U.S. dollars per
Euro: $1.2223/€
Barclays Bank quotes U.S. dollars
per pound sterling: $1.8410/£
Dresdner Bank quotes Euros per
pound sterling: €1.5100/£
You are a market trader with
$1,000,000. Will you be able to
make an arbitrage profit using
these quotes? If yes, why? What
will be the profit? Show your
calculations.
Transcribed Image Text:Suppose the following exchange rate quotations are available: Citibank quotes U.S. dollars per Euro: $1.2223/€ Barclays Bank quotes U.S. dollars per pound sterling: $1.8410/£ Dresdner Bank quotes Euros per pound sterling: €1.5100/£ You are a market trader with $1,000,000. Will you be able to make an arbitrage profit using these quotes? If yes, why? What will be the profit? Show your calculations.
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