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Suppose we observe the following quotes from 3 different banks: Bid Ask Deustche USD/SFr 1.245 1.2455 JP Morgan USD/NZD 0.7845 0.7856 HSBC SFr/NZD 0.7014 0.7025

Suppose we observe the following quotes from 3 different banks:

Bid Ask
Deustche USD/SFr 1.245 1.2455
JP Morgan USD/NZD 0.7845 0.7856
HSBC SFr/NZD 0.7014 0.7025

Do we have an arbitrage opportunity?

If so, starting with 3 million NZD, how do we make profits and by how much? (15 MARKS)

Show your workings.

In your answer, keep 4 decimal places for exchange rate calculation.

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