Question

How would an investor be able to profit in Forex markets given the following conditions? -...

How would an investor be able to profit in Forex markets given the following conditions?

- $0.20 per rupee in Singapore

- 7 rupees per euro in London

- $1.50 per euro in New York

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Answer #1

The profit can be generated by executing the following transactions step by step:

Step 1: Buy rupee in exchange of dollar at 0.2 in Singapore.

Step 2: Use the rupee bought in step 1 to purchase Euro in London.

Step 3: Sell the Euro in New York in exchange for Dollar at $1.50 per Euro.

As a result of steps 1 and 2 the price of Dollar in terms of Euro is 1.40. So the buying price of 1 Euro is $1.40

Selling price of Euro in step 3 is $1.50

Hence, profit = 1.50 - 1.40 = $ 0.10 per Euro.

Kindly up vote my answer.

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