Question
As a foreign exchange trader, you see the following quotes for CAD, USD and MXN: USD 0.7451/CAD MXN 5.9734/CAD MXN 8.2201/USD Is there an arbitrage
As a foreign exchange trader, you see the following quotes for CAD, USD and MXN:
USD 0.7451/CAD
MXN 5.9734/CAD
MXN 8.2201/USD
Is there an arbitrage opportunity, and if so, how would you exploit it?
a) Draw the triangular diagram with currencies, and indicate which direction to move around.
b) You can start with any currency but start using 1,000 units of the currency you choose
c) Show your working step-by-step, and present the final result with a rate of return in % .
Step by Step Solution
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Step: 1
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
