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.