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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