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1. Triangular Arbitrage: Bid Ask Bank A NOK/EUR 10,1512 NOK/EUR 10,1889 Bank B EUR/USD 0,8121 EUR/NOK 0,8371 Bank C NOK/USD 8,0002 NOK/USD 8,1814 a. (20

1. Triangular Arbitrage:

Bid

Ask

Bank A

NOK/EUR 10,1512

NOK/EUR 10,1889

Bank B

EUR/USD 0,8121

EUR/NOK 0,8371

Bank C

NOK/USD 8,0002

NOK/USD 8,1814

a. (20 points) Show how you can make a triangular arbitrage profit by trading at these prices. What will be your profit in Euro if you have Euro 1,000,000 with which to conduct the arbitrage? Use four decimals.

b. (5 points) What NOK/USD bid-ask prices would eliminate the triangular arbitrage? Use four decimals.

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