1) The following exchange rates are available to you.

• US$ /
• US$/SF
• GM 1.62/US$

I. Calculate the cross exchange rate between the British pound () and the Mark (GM)

II. How many Swiss France can one U.S dollars purchase?

2. The following exchange rates are available to you. (You can buy or sell at the stated rates.)

Mt. Fuji Bank 92.00/$

Mt. Rushmore Bank SF1.02/$

Mt Blanc Bank 90.00/SF

Assume you have an initial SF12,000,000. Can you make a profit via triangular arbitrage? If so, show the steps and calculate the amount of profit in Swiss francs (Swissies).

Assumptions Values

Beginning funds in Swiss francs (SF) 12,000,000.00

Mt. Fuji Bank (yen/$) 92.00

Mt. Rushmore Bank (SF/$) 1.0200

Matterhorn Bank (yen/SF) 90.00