Question
On your post-graduation celebration trip you are leaving Paris for Shanghai, China. You leave Paris with 10,000 euros in your money pouch. Wanting to exchange
On your post-graduation celebration trip you are leaving Paris for Shanghai, China. You leave Paris with 10,000 euros in your money pouch. Wanting to exchange all of these for Chinese RMB, you obtain the following quotes:
Spot rate ($/) $1.4260/
Spot rate (Rubles/$) RMB 6.7550/$
What is the Chinese RMB/euro cross rate?
Is there a triangular arbitrage opportunity?
Which currency is overpriced?
Which currency is underpriced?
What should be your arbitrage transaction (which currency should you sell, and which currency should you buy to make the arbitrage profit)?
How much money will you end up with after the arbitrage?
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