Intro

You have $26,000 and observe the following exchange rates:

Exchange rate	Bid	Ask
Value of euro in U.S. dollars	$1.07	$1.08
Value of Swiss franc in U.S. dollars	$1.01	$1.02
Value of euro in Swiss francs	CHF1.01	CHF1.02

Part 1

What is the no-arbitrage value of the euro in Swiss francs (the cross exchange rate)? Use the ask quotes.

Part 2

Is there an arbitrage opportunity? If so, what should you do to exploit it?

Yes: buy Swiss francs with euros

Yes: buy euros with Swiss francs

No

Part 3

How many Swiss francs do you get from converting your dollars?

Part 4

How many euros do you get from converting your Swiss francs?

Part 5

How many dollars do you get from converting your euros?

Part 6

What is your profit from exploiting the opportunity once (in $)?