1. Suppose you observe the following quotes:

ACR: =230

=$1.1

=$.005

Find the triangular arbitrage profit (in dollars) for someone that has access to 1 million dollars.

		265,000
		0
		45,454.55
		127,000

2. Based on the information in the previous question, the yen will appreciate against the dollar to eliminate the arbitrage opportunity.

True

False

3.Suppose you observe the following quotes:

ACR: 1.25/

$1.8/

$2/

Find the maximum arbitrage profit (in dollars) to someone that has access to $10 million at an interest rate of 2%. Round intermediate steps to four decimals. Do not enter the dollar sign when inputting your answer.

4. Triangular arbitrage opportunities occur when the actual cross rate differs from the implied cross rate.

True

False