Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Commerzbank is quoting $0\mathrm{.}7777/$$$1\mathrm{.}00,$ and Credit Suisse is offering SF$1\mathrm{.}1956/$$$1\mathrm{.}00.$ You learn that UBS is making a direct market between the Swiss franc and the euro, with a current $/$SFr quote of $0\mathrm{.}6245.$ Show how you can make a triangular arbitrage profit by trading at these prices. Ignore bid$-$ask spreads for this problem. Assume you have $$5,003,000$ with which to conduct the arbitrage. Enter only the numeric portion of your answer without the currency symbols.

Required:

a$.$ What is the implied $/$SFr cross$-$rate derived from the dollar exchange rates quoted by Commerzbank and Credit Suisse? b$-1.$ Describe the sequence of transactions you should undertake to earn a triangular arbitrage profit. b$-2.$ What is your triangular arbitrage profit?

c$.$ What happens if you initially sell dollars for Swiss francs?

d$.$ What $/$SFr price will eliminate triangular arbitrage?