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Suppose the Brazilian real is trading at 1 real = $.20 US, and the South African...

Suppose the Brazilian real is trading at 1 real = $.20 US, and the South African rand is trading at $.060 US. The value of one South African rand is ________ Brazilian real, assuming triangular arbitrage holds,

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Answer #1

Answer :

1 Brazilian real = $0.20 US Dollar [Note : Given]

Or other way round, $1 US Dollar = (1/0.20) Brazilian real = 5 Brazilian real

1 South African rand = $0.060 US Dollar [Note : Given]

Or other way round, $1 US Dollar = (1/0.060) South African rand = 16.67 South African rand

If triangular arbitrage holds then :

5 Brazilian real = 16.67 South African rand

Thus 1 South African rand = (5/16.67) Brazilian real = 0.3 Brazilian real

Answer : The value of one South African rand is 0.3 Brazilian real, assuming triangular arbitrage holds.

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