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As a foreign exchange trader, you see the following quotes for Canadian dollars (CAD), U.S. dollars (USD), and Mexican pesos (MXN): USD0.7047/CAD MXN6.4390/CAD MXN8.7535/USD You
As a foreign exchange trader, you see the following quotes for Canadian dollars (CAD), U.S. dollars (USD), and Mexican pesos (MXN):
USD0.7047/CAD MXN6.4390/CAD MXN8.7535/USD
You have $1000 to trade in foreign currency.
- What is the no arbitrage (implied cross-rate) of MXN/USD?
- Using the quotes provided for the three currency pairs, determine the arbitrage profit of investing the $1000.
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