Question
You are a US-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.20 = 1.00 and the dollar-pound exchange rate is
You are a US-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.20 = €1.00 and the dollar-pound exchange rate is $1.80 = £1.00. If a bank offers you a cross rate of £1.00 = €1.50, how much money can you make (in dollars) via triangle arbitrage?
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International Economics Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz
11th Edition
134519574, 9780134521046 , 978-0134519579
