Question
Citibank quotes U.S. dollar per pound: $1.5000/ National Westminster quotes euros per pound: 2.0000/ Deutschebank quotes U.S. dollar per euro: $0.7550/ a. Show how you,
| Citibank quotes U.S. dollar per pound: |
| $1.5000/ |
| National Westminster quotes euros per pound: |
| 2.0000/ |
| Deutschebank quotes U.S. dollar per euro: |
| $0.7550/ |
a. Show how you, as currency trader at Citibank with $1,000,000 can make an intermarket arbitrage profit in detail. Show the profit in US dollar.
b. Suppose now that National Westminster quotes euros per pound at 1.9800/. Show how you, as currency trader at Citibank with $1,000,000 can make an intermarket arbitrage profit in detail. Show the profit in US dollar.
c. Based on your answer from part (a), explain how arbitrage profit can disappear when currency traders like you seek to exploit arbitrage profits.
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Financial Management Core Concepts
Authors: Raymond M Brooks
3rd edition
133866696, 978-0133866698
