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q16 The following table presents the quotations of 3 exchange rates: City Bank quotes US dollars per Swiss Franc USD 0.9000 = 1 SF Best
q16
The following table presents the quotations of 3 exchange rates:
City Bank quotes US dollars per Swiss Franc
USD 0.9000 = 1 SF
Best Bank quotes US dollars per Euro
USD 1.5000 = 1 EUR
Euro Bank quotes Swiss Franc per Euro
SF 2.6000 = 1EUR
1) Does the Euro Bank's quotation comply with the non-arbitrage condition? Justify your answer (calculations)
2) Suppose you have $50,000, show how to get a positive profit using the quotes offered by the 3 banks.
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