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(1) Bank of Kramerica, a U.S. bank, is quoting St = 1.20 CHF/USD, St = 5.85 PLZ/USD (PLZ=Polish Zloty). Calculate Bank of Kramerica's PLZ/CHF cross-rate.

(1) Bank of Kramerica, a U.S. bank, is quoting St = 1.20 CHF/USD, St = 5.85 PLZ/USD (PLZ=Polish

Zloty). Calculate Bank of Kramerica's PLZ/CHF cross-rate.

(2) Suppose Kramerica is quoting St = 5.50 PLZ/CHF. Construct a trading strategy (i.e., triangular arbitrage) to take advantage of Bank of Kramerica's quotes.

(3) Calculate the arbitrage profits.

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