1. [3 points] Suppose someone starts with 1 CAD.

She wants to make an arbitrage profit by first converting CAD to CNY and then back to CAD.

On 2021.01.15,

=5.08693;

= 0.7789 ;

= 6.4805 .

a. Calculate the cross rate of converting CAD to CNY via USD.

b. Is there any arbitrage opportunity? If yes, how can she realize it in CAD? Put the steps she will use to make the arbitrage profit in CAD in the table below. What is her profit in CAD using 1 CAD? What is her profit if she uses 1,000,000 CAD to start with

steps amount of money

steps	amount of money
arbitrage profit of using 1 CAD
Arbitrage profit of using 1000000 CAD

c. Explain what will happen to if many currency traders take advantage of this arbitrage opportunity?