Question

Assume the following information: Exchange rate of Singapore dollar in USD = 0.32 USD/SGD Exchange rate...

Assume the following information:

Exchange rate of Singapore dollar in USD = 0.32 USD/SGD
Exchange rate of pound in USD = 1.49 USD/GBP
Exchange rate of pound in Singapore dollars = 4.8 SGD/GBP

If you have 1 million USD to conduct one cycle of triangular arbitrage, what will be your profit?

Homework Answers

Answer #1
USD GBP = USD/ 1.49 SGD = GBP x 4.8 USD=SGP x .32
1000000 671140.9396 3221476.51 1030872.483
US Dollar has Inceased by 30872.48

Explanation:

we have USD 1000000 in hand. If we convest it to GBP, we will get Equivalent GBP = 1000000/1.49 = GBP 671140. 94

If we convert GBP of 671140. 94 into SGD, we will get = 671140. 94 x 4.8 = SGD 3221476.51 .

Now, we are again converting the SGD into US dolloar using convesrion rate 0.32 USD / SGD

We got USD value of 1030872.48 USD.

Initial investment 1000000

Hence, Profit = 1030872.48 - 1000000 = 30872.48

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