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As an employee of the foreign exchange department for a large company, you have been given...

  1. As an employee of the foreign exchange department for a large company, you have been given the following information:

    Beginning of Year

    Spot rate of £ ? $1.596
    Spot rate of Australian dollar (A$) ? $.70 Cross exchange rate: £1 ? A$2.28 One-year forward rate of A$ ? $.71 One-year forward rate of £ ? $1.58004 One-year U.S. interest rate ? 8.00% One-year British interest rate ? 9.09% One-year Australian interest rate ? 7.00%

    Determine whether triangular arbitrage is feasible and, if so, how it should be con- ducted to make a profit.

  2. 2 Using the information in question 1, determine whether covered interest arbitrage is feasible and, if so, how it should be conducted to make a profit.

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I have explained step by step, if you face any doubt., Please comment in the box. Thank you !

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