Problem $19-14$ Spreadsheet Problem: Triangular Arbitrage $($LG$19-3)$

The U$.$S$.$ dollar spot exchange rate with the Australian dollar is $$1=A$$$1\mathrm{.}2703.$ The U$.$S$.$ dollar and euro exchange rate is $$1=0\mathrm{.}7565.$

The cross$-$rate between the euro and Australian dollar is $1=$ AU $$1\mathrm{.}5986.$ What is the inferred cross$-$rate? Is an arbitrage possible?

Note: Do not round intermediate calculations. Round your answer to $4$ decimal places.

A

B

$C$

Mispricing

US$ to AU$ Exchange Rate

$$1=$

AUD $1\mathrm{.}2703$

US$$-$to$-$Euro Exchange Rate

$$1=$

$0\mathrm{.}7565$

Cross Rates

Euro$-$to$-$AU$ Exchange Rate

$1=$

AUD $1\mathrm{.}5986$