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You are in Australia and see the posted exchange rates: CHF 1.6079 = 1 USD, AUD 1.8358 = 1 USD, AUD 1.1524 = 1 CHF.
You are in Australia and see the posted exchange rates: CHF 1.6079 = 1 USD, AUD 1.8358 = 1 USD, AUD 1.1524 = 1 CHF. a. Provide evidence that an arbitrage exists. b. What steps would you take to make an arbitrage profit? c. How much profit would you make if you begin with AUD 1,000,000? d. What CHF/USD rate would remove the arbitrage? C
Referring to Question 1 on triangular arbitrage, explain why cross-exchange rates are an important concept in the foreign exchange market.
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