Question
The three Exchange Rates are as follows: 1) US Dollar (USD) - Canadian Dollar (CAD) for 1.05 CAD - 1 USD 2) CAD - Euro
The three Exchange Rates are as follows:
1) US Dollar (USD) - Canadian Dollar (CAD) for 1.05 CAD - 1 USD
2) CAD - Euro (EUR) for 1 CAD - 1 EUR 3) EUR - 0.72 - USD
Let's say you start with 1 100,000 USD and do one round of "triangle arbitrage", that is, you trade a total of 3 currencies to start from USD and return to USD.
What will your earnings be in USD?
(Note: Profit will be the Final USD amount - $100,000. No transaction costs.)
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To perform triangle arbitrage we need to look for an opportunity where the exch...
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
