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Suppose the Swiss Franc exchange rate is CHF 2.00 = USD 1.00 and the British Pound exchange rate is GBP 0.60 = USD 1.00. Suppose

Suppose the Swiss Franc exchange rate is CHF 2.00 = USD 1.00 and the British Pound exchange rate is GBP 0.60 = USD 1.00.

Suppose a dealer quotes a rate of 3 CHF = 1 GBP.

  1. What is the CHF/GBP cross rate?
  2. Is there an arbitrage opportunity here? If, yes then calculate the arbitrage profit on $5,000?

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