Use the following information to answer the next two questions.

Suppose you observe the following quotes in the FX market:

ACR: CHF2.5/BP

$2.25/BP

CHF1.25/$

Suppose you have access to 5 million USD. What is the maximum amount you can earn (in terms of USD) with one triangular transaction? Round intermediate steps to four decimals.

416,000

-555,556

625,000

0

Which of the following would happen to eliminate the arbitrage opportunity in the previous question?

		The pound will appreciate against the franc.
		The franc will depreciate against the dollar.
		The pound will appreciate against the dollar.
		No adjustment is necessary since arbitrage was not possible.