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You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.110 = 1.00 and the dollar-pound exchange rate is
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.110 = 1.00 and the dollar-pound exchange rate is quoted at $1.554 = 1.00. If a bank quotes you a cross rate of 1.00 = 1.40, how much money can an astute trader make?
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a. No arbitrage is possible
b. $7160,129
c. $440,000
d. $79,286
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