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?
|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|
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