You have access to the following three spot exchange rates:

$1.49 Excluding Tax

Complete Solution:

Solution Available in PDF File.

-
+

Description

QUESTION:

You have access to the following three spot exchange rates:

$0.01/yen

$0.20/krone

25 yen/krone

You start with dollars and want to end up with dollars.

a. How would you engage in arbitrage to profit from these three rates? What is the profit for each dollar used initially?

b. As a result of this arbitrage, what is the pressure on the cross-rate between yen and krone? What must the value of the cross-rate be to eliminate the opportunity for triangular arbitrage?


Reviews

There are no reviews yet.

Be the first to review “You have access to the following three spot exchange rates:”

Your email address will not be published. Required fields are marked *