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Suppose you are a U.S.-based investor with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.60 = 1.00 and the dollar-pound exchange rate
Suppose you are a U.S.-based investor with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.60 = 1.00 and the dollar-pound exchange rate is quoted at $2.00 = 1.00. If a bank quotes you a cross rate of 1.00 = 1.20. Is there any arbitrage opportunities? What transactions will you carry out? How much money can you make
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