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A U.S. dollar costs 7.5 Norwegian kroner, but the same dollar can be purchased for 1.25 Swiss francs. What is the Norwegian krone/Swiss franc exchange
A U.S. dollar costs 7.5 Norwegian kroner, but the same dollar can be purchased for 1.25 Swiss francs.
- What is the Norwegian krone/Swiss franc exchange rate (ENOK/SFr) supposed to be? (10 pts)
- answer 6
- Suppose that the Norwegian krone/Swiss france exchange rate is ENOK/SFr =6.10, instead. Can you profit immediately by doing some currency transactions simultaneously on the three foreign exchange markets (US, Norway, Switzerland)? Suppose you have $100 on hand. Show how much you can profit from those currency transactions, which are known as "triangular arbitrage." (15 pts)
- Explain whether or not the triangular arbitrage opportunity can persist on the foreign exchange markets. (5 pts)
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Statistics For Business And Economics
Authors: James T. McClave, P. George Benson, Terry Sincich
13th Edition
134506596, 978-0134506593
