Question
You are given the following exchange rate data: Canadian Dollar: CAD 1.1280/USD &nbs
You are given the following exchange rate data:
Canadian Dollar: CAD 1.1280/USD
British Pound: USD 1.8840/GBP
(a) How many Canadian Dollars can be purchased with 1 British Pound?
(b) If you learn that the cross rate quoted by the Bank is actually CAD 2.1280/GBP, what would be your triangular arbitrage profits if you could put USD $1,000,000 into this arbitrage? To get full credits, you need to include step by step instructions on how to carry out this strategy.
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