Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting 0.855/$1.00 Credit Suisse is offering SF1.1825/$1.00. UBSs current direct quoting /SF currently @ 0.754/SF

i. Prove and explain whether at these quoted rates there a chance for triangular arbitrage (Hint: Use the no arbitrage cross exchange rate here).

ii. Show and explain how you can make a triangular arbitrage profit by trading at these prices. (Ignore bid-ask spreads for this problem.) Assume you have $5,000,000 with which to conduct the arbitrage. If your answer in a is that there is no chance of arbitrage profits please say so.