You obtain the following quotes from different banks. One bank is willing to buy or sell Japanese yen at an exchange rate of 114 yen per dollar. A second bank is willing to buy or sell the Argentine peso at an exchange rate of $0.36 per peso. A third bank is willing to exchange Japanese yen at an exchange rate of 1 Argentine peso = 43 yen. a. Show how you can make a profit from triangular arbitrage. I. You need to obtain yen and convert to pesos, and then convert to dollars. II. You need to obtain pesos and convert to yen, and then convert to dollars. -Select- What would your profit be if you had $1,100,000? Do not round intermediate calculations. Round your answer to the nearest dollar. $ b. As investors engage in triangular arbitrage, explain the effect on each of the exchange rates until triangular arbitrage would no longer be possible. I. As dollars are converted to yen, the yen's value should appreciate against the dollar. As yen are converted into pesos, the yen's value should depreciate against the peso. As pesos are converted into dollars, the peso's value should depreciate against the dollar. II. As dollars are converted to pesos, the peso's value should appreciate against the dollar. As pesos are converted into yen, the peso's value should depreciate against the yen. As yen are converted into dollars, the yen's value should depreciate against the dollar. III. As dollars are converted to yen, the yen's value should depreciate against the dollar. As yen are converted into pesos, the yen's value should appreciate against the peso. As pesos are converted into dollars, the peso's value should appreciate against the dollar. IV. As dollars are converted to pesos, the peso's value should depreciate against the dollar. As pesos are converted into yen, the peso's value should appreciate against the yen. As yen are converted into dollars, the yen's value should appreciate against the dollar. -Select- v You obtain the following quotes from different banks. One bank is willing to buy or sell Japanese yen at an exchange rate of 114 yen per dollar. A second bank is willing to buy or sell the Argentine peso at an exchange rate of $0.36 per peso. A third bank is willing to exchange Japanese yen at an exchange rate of 1 Argentine peso = 43 yen. a. Show how you can make a profit from triangular arbitrage. I. You need to obtain yen and convert to pesos, and then convert to dollars. II. You need to obtain pesos and convert to yen, and then convert to dollars. -Select- What would your profit be if you had $1,100,000? Do not round intermediate calculations. Round your answer to the nearest dollar. $ b. As investors engage in triangular arbitrage, explain the effect on each of the exchange rates until triangular arbitrage would no longer be possible. I. As dollars are converted to yen, the yen's value should appreciate against the dollar. As yen are converted into pesos, the yen's value should depreciate against the peso. As pesos are converted into dollars, the peso's value should depreciate against the dollar. II. As dollars are converted to pesos, the peso's value should appreciate against the dollar. As pesos are converted into yen, the peso's value should depreciate against the yen. As yen are converted into dollars, the yen's value should depreciate against the dollar. III. As dollars are converted to yen, the yen's value should depreciate against the dollar. As yen are converted into pesos, the yen's value should appreciate against the peso. As pesos are converted into dollars, the peso's value should appreciate against the dollar. IV. As dollars are converted to pesos, the peso's value should depreciate against the dollar. As pesos are converted into yen, the peso's value should appreciate against the yen. As yen are converted into dollars, the yen's value should appreciate against the dollar. -Select- v
