The Singapore dollar$-$U$.$S$.$ dollar $)$ spot exchange rate is $S$$$\frac{10}{\text{\$}},$ the Canadian

dollar$-$U$.$S$.$ dollar $($CD$/$$$)$ spot rate is CD $\frac{5}{\text{\$}},$ and the Singapore dollar$-$Canadian

dollar spot exchange rate is $S$$$\frac{1\mathrm{.}80}{C}D.$

a$)$ Figure out the correct cross exchange rate for Singapore dollar against

Canadian dollar $($S$$/$CD$)$ that eliminates a triangular arbitrage. $(20$points$)$

b$)$ You plan to exploit the triangular arbitrage opportunity when you have $$10$mil.

to invest.

i$)$ Given the difference between the spot market exchange rate and the correct

cross exchange rate, which currency is underpriced$/$undervalued on the

spot market? Canadian dollar or Singapore dollar? $(20$points$)$

ii$)$ How many Singapore dollars can you buy or sell in exchange for Canadian

dollars when you exploit the arbitrage opportunity using $$10$mil.? $(30$points$)$

iii$)$ Figure out your profit in U$.$S$.$ dollars. $(30$points$)$