Question

**Use the following information to answer this question.
The Indian rupee to US dollar exchange rate is quoted at Bank A as
INR 74 =1 USD. The Canadian dollar (CAD) to US dollar exchange rate
is quoted at Bank B as CAD 1.3 = 1 USD. You learn that Bank C is
making a direct market between the Indian rupee and the Canadian
dollar INR/CAD quote of 56 INR = 1 CAD.**

How much profit can an astute trader with $5,348,673 make from triangular arbitrage between Banks A, B, and C?

Please Show Work

Answer #1

The trader will start with USD, convert it into INR, then into CAD and then back into USD.

He will recieve $ 5,436,836.94 at the end of all the transactions as shown below in the ima, hence making a profit of $ 88,163.94

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...

1. a Suppose the nominal exchange rate between
the US dollar and the Canadian dollar is 1.25 (1 US dollar can buy
1.25 Canadian dollars).
If the price of a basket of goods in the USA is 150 USD and in
Canada is 175 CAD, then find out the real exchange rate between the
USA and Canada.
1. b Interpret the value of the real exchange rate
you found in 1. a
2. Again suppose the nominal
exchange rate between the...

1a.Suppose the nominal exchange rate between the US dollar and
the Canadian dollar is 1.25 (1 US dollar can buy 1.25 Canadian
dollars).
If the price of a basket of goods in the US is 150 USD and in
Canada is 175 CAD, then find out the real exchange rate between the
US and Canada.
1b. Interpret the value of the real exchange rate
2. Again suppose the nominal exchange rate between the US and
Canada is 1.25 (1 US...

The exchange rate between China’s Yuan and India’s Rupee
yesterday was 0.09 Yuan per Rupee. If the exchange rate today is
0.08 Yuan per Rupee, Which currency appreciated in value?
2. Annie wants to go on vacation next month. She has saved
$1,200 Canadian Dollars to use towards her vacation. Which option
would give Annie a better deal for her money? Mexico or the U.S.?
She looks up the Canadian dollar exchange rates and they are as
follows: 0.75 USD...

Suppose you are in New York and notice the below exchange rates.
Use these and $100 to conduct arbitrage and calculate the profit
earned. 1 USD = 69.13 Indian Rupee, 1 USD = 1.33 Canadian Dollar,
and 1 Canadian Dollar = 52.87 Indian Rupee. (8 pts.)

Suppose you are in New York and notice the below exchange rates.
Use these and $100 to conduct arbitrage and calculate the profit
earned. 1 USD = 69.13 Indian Rupee, 1 USD = 1.33 Canadian Dollar,
and 1 Canadian Dollar = 52.87 Indian Rupee. (8 pts.)
please show work!!

Part II: Triangular Arbitrage The quotations of exchange rates
of US dollars, British pound, and the New Zealand dollar in
National Bank is as below. Quoted Bid Price Quoted Ask Price
USD/GBP 0.65 0.66 NZD/USD 0.50 0.52 GBP/NZD 2.72 2.75 Is the
triangular arbitrage feasible? If yes, how much is the triangular
arbitrage profit when you have $500,000 to invest. If no, please
explain why

Part II: Triangular Arbitrage
The quotations of exchange rates of US dollars, British pound,
and the New Zealand dollar in National Bank is as below.
Quoted Bid Price
Quoted Ask Price
USD/GBP
0.65
0.66
NZD/USD
0.50
0.52
GBP/NZD
2.72
2.75
Is the triangular arbitrage feasible? If yes, how much is the
triangular arbitrage profit when you have $500,000 to invest. If
no, please explain why (20 points)

A. Take the following two exchange rates and compute the EUR/INR
cross exchange rate. INR12.1225/USD and EUR.8145/USD.
B. In question A, if there is a direct cross exchange rate of
EUR.066215/INR, is there a triangular arbitrage opportunity? If
yes, start with $50,000 and indicate how much triangular arbitrage
profit exists for 1 trip around the triangle.

Assume the following information:
Exchange rate of Singapore dollar in USD = 0.32 USD/SGD
Exchange rate of pound in USD = 1.45 USD/GBP
Exchange rate of pound in Singapore dollars = 4.88 SGD/GBP
If you have 1 million USD to conduct one cycle of triangular
arbitrage, what will be your profit?

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