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Assume a USD is worth JPY 81.26, (St=81.26 JPY/USD). Also, a JPY is worth CAD .0124 (St=.0124 CAD/JPY). i. What is the cross rate CAD/USD?

Assume a USD is worth JPY 81.26, (St=81.26 JPY/USD). Also, a JPY is worth CAD .0124 (St=.0124 CAD/JPY).

i. What is the cross rate CAD/USD? ii. Suppose Kwiki Bank quotes St=.93 USD/CAD. Is arbitrage possible? (Why?) iii. If yes, describe a triangular arbitrage strategy and determine an arbitrageurs profits.

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