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(12 points) Consider the following exchange rate quotations provided by three different banks: Bank of America: $0.80/C$ Bank of Toronto: SF1.42/C$ Deutsche Bank: $0.55/SF Suppose
(12 points) Consider the following exchange rate quotations provided by three different banks:
Bank of America: $0.80/C$
Bank of Toronto: SF1.42/C$
Deutsche Bank: $0.55/SF
Suppose you are a U.S.-dollar based trader with $1,000,000 capital. Show how you can make arbitrage profit from the above exchange rate quotation. Also determine the arbitrage profit in U.S. dollar terms. (Hint: assume that SF/C$ is mispriced)
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