Instructions: Please show all your calculations in an orderly fashion.
There is no credit for just the answers. Please work alone as
collaborating with others constitutes cheating.
There is no credit for just the answers. Please work alone as
collaborating with others constitutes cheating.
1. You observe the
following exchange rate quotes for the South African Rand (ZAR), and the
Swedish Krona (SEK):
following exchange rate quotes for the South African Rand (ZAR), and the
Swedish Krona (SEK):
ZAR 14.7918/$
SEK 8.6686/$
SEK 0.5534/ ZAR
a)
If
you start with $ 1 million, what arbitrage profit in dollars can you
make using triangular arbitrage? Show all your calculations in a clear
and orderly fashion. No credit will be given for just answers.
you start with $ 1 million, what arbitrage profit in dollars can you
make using triangular arbitrage? Show all your calculations in a clear
and orderly fashion. No credit will be given for just answers.
b)
At
what exchange rate (SEK/ZAR) will triangular arbitrage yield zero
profits?
what exchange rate (SEK/ZAR) will triangular arbitrage yield zero
profits?