The following dollar exchange rates were obtained from the August 5, 2020 issue of the Wall Street Journal:

$1.1864/ 105.60/$

Lets say Citi makes a market between $ and and JPMorgan makes a market between and $ at these rates. Sumitomo Bank, on the other hand, makes a direct market between and at the rate of 123/. Is there a triangular arbitrage opportunity here? If so, how can you make money if you were an American investor with $100,000? Or if you were a European investor with 100,000 to invest?

1. Compute the implied cross-rate between and .

2. Compare the implied cross-rate against the quoted cross-rate and determine if there is a triangular arbitrage opportunity

3. Identify the sequence of transactions if you were an American investor with $100,000 to start with. Calculate your $ profit.

4. What happens if you engage in transactions in the opposite direction?

5. Identify the sequence of transactions for a European investor with 100,000 to invest. Calculate your profit.