Question

Jane Cruise has U.S. dollars ($) amounting to $1,000,000, and is provided with the following quotes:

Bank C: Euro/US dollar = €0.8529/$

Bank C: British pound /US dollar = £0.7501/$

Bank D: British pound/Euro = £0.8664/€

Jane did her own direct cross rate calculation of the British pound/Euro and according to her the British pound/Euro = £0.8664/€ quotation from Bank D, provides her with an arbitrage opportunity, since the direct cross rate, based on the quotations of Bank C is £0.8795/€. How much profit can Jane make from this opportunity?

Use the space below to show the steps that Jane must take to make a profit. For example show all the steps in the following way in the space provided below (please note the example just show you how to write your steps since the currencies and exchange rates in the example are not applicable to the question):

Step 1: Buy Yen with dollar 1000,000 at exchange rate of $1.0965/Yen = Yen 911,992

Step 2: Sell Yen 911,992 for Pound at exchange rate2.0561/Yen  = Pound 443,554.64

Step 3:  ...........................................................................................................

Profit =

Answer 1