Question

You observed the bid rate of the New Zealand dollar is $.3232 while the ask rate is $.3245 at Bank X. The bid rate of a New Zealand dollar is $.3324 while the ask rate is $.3342 at Bank Y. What would be your dollar amount profit if you use $1,000,000 to execute locational arbitrage?

Answer 1

	We have the $ 1,000,000 for arbitrage
	So, Firest We can buy the Australian dollarn from bank X becaue in this bank New Zealand dollar is cheap
	So New Zeland Dollar = $ 1,000,000 / $ 0.3232 =	$ 30,94,059.41
	Now We can sell this at Bank Y
	In $ price = $ 30,94,4059.41 X $ 0.3342 =	$ 10,34,034.65
	Less: Pruchase Prcie =	$ 10,00,000.00
	Profit =	$        34,034.65