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2. Examine the cross-spot rates shown in Exhibit 2. Are there any triangular arbitrage opportunities among these currencies (assume deviations from theoretical cross rates of

2. Examine the cross-spot rates shown in Exhibit 2. Are there any triangular arbitrage opportunities among these currencies (assume deviations from theoretical cross rates of 5 points or less are attributable to transaction costs)? How much profit could be made on a $5 million transaction?

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Exhibit 2 Cross-Spot Exchange Ratesa DM FF Yen DM .3050/51 1.3169/71 FF 3.2779/88 4.3365/84 Yen 75.9232/350 23.1595/618 Exhibit 2 Cross-Spot Exchange Ratesa DM FF Yen DM .3050/51 1.3169/71 FF 3.2779/88 4.3365/84 Yen 75.9232/350 23.1595/618

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