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1. (5 points) Assume the following information for a bank quoting on spot exchange rates: Exchange rate of pound in U.S. S Exchange rate
1. (5 points) Assume the following information for a bank quoting on spot exchange rates: Exchange rate of pound in U.S. S Exchange rate of Singapore dollar in U.S. $ Exchange rate of pound in Singapore dollars $1.50 $.30 S$5.20 Given this information, if triangular arbitrage is possible, which of the following answer is the correct arbitrage strategy. a). Convert USD to Singapore dollar, then to British pound, and finally back to USD b). Convert USD to British pound, then to Singapore dollar, and finally back to USD Please briefly explain why.
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The correct answer is b Convert USD to British pound then to Singapore dollar and finally back to USD Triangular arbitrage exploits inefficiencies in exchange rates to make a profit In this case the i...
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
