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3) Suppose the bid and ask prices of Thai baht for each bank are displayed in the table below: Chase $0.0228 $0.0229 Citibank Bid $0.0224
3) Suppose the bid and ask prices of Thai baht for each bank are displayed in the table below: Chase $0.0228 $0.0229 Citibank Bid $0.0224 Ask $0.0227 a) Is locational arbitrage possible? Assume an investment of $100,000 and find out if profits are possible through arbitrage. provided the following quotations for the U.S. dollar and the Japanese yen: Value of a Japanese yen in U.S. dollars $0.0085 b) Besides the bid and ask quotes for the Thai baht provided in the previous question, Citibank has Quoted Ask Price $0.0086 Quoted Bid Price Value of a Thai baht in Japanese yen 2.69 2.70 Determine whether the cross exchange rate between the Thai baht and Japanese yen is appropriate. If it is not appropriate, determine the profit you could generate with an investment of $100,000 by engaging in triangular arbitrage. c) Suppose you are able to obtain several forward contract quotations for the Thai baht to determine whether covered interest arbitrage may be possible. You are quoted a forward rate of $0.0225 per Thai baht for a 90-day forward contract. The current spot rate is $0.0227. Ninety-day interest rates available in the U.S. are 2 percent, while 90-day interest rates in Thailand are 3.75 percent (these rates are not annualized). Determine whether the covered interest arbitrage is possible. If so, how much profit can be generated with an investment of $100,000
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