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Problem 4 (Graduate Students only) (Triangular Arbitrage): You go to a bank and are given these quotes: You can buy a euro for 14 pesos.
Problem 4 (Graduate Students only) (Triangular Arbitrage): You go to a bank and are given these quotes: You can buy a euro for 14 pesos. The bank will pay you 13 pesos for a euro. You can buy a US dollar for 0.9 euros. The bank will pay you 0.8 euros for a US dollar. You can buy a US dollar for 10 pesos. The bank will pay you 9 pesos for a US dollar. You have $1,000. Can you use triangular arbitrage to generate a profit? If so, explain the order of the transactions that you would execute and the profit that you would earn. If you cannot make a profit from triangular arbitrage, explain why
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