Solution: | |||
Answer is 4th option $147.19 | |||
Working notes: | |||
To get arbitrage profit in $ we have to end our transaction cycle at $ | |||
Given equation are | |||
1st | $1 = Can$1.1001 | ||
2nd | $1 = £.7307 | ||
3rd | Can$1 = £.6731 | ||
Notes | Strategy is 1st Sell $11,000 and get Can$ using 1st equation , then sell Can$ and Buy £ using 3rd equation and last sell £ and get $ at last. | ||
First | Selling $11,000 and getting Can$ using 1st equation | ||
1st | $1 = Can$1.1001 | ||
So | $11,000 = 11,000 x Can$1.1001= Can$12,101.10 | ||
Then | We will sell these Can$12,101.10 to get £ using 3rd equation | ||
Can$1 = £.6731 | |||
Can$12,101.10 = £.6731 x 12,101.10 =£8,145.250410 | |||
At last | We will sell £8,145.250410 to get $ using 2nd equation | ||
$1 = £.7307 | |||
£.7307 = $1 | |||
£1 = $(1/.7307) | |||
£1 = $1.368550705 | |||
So | £8,145.250410 to get $ | ||
£8,145.25041 = $ (1.368550705 x 8,145.25041) | |||
£8,145.25041 = $11147.18819 | |||
Hence | At end we have $11147.18819,wee started with $11,000, definitely we makes some profit, let see. | ||
Arbitrage profit = Balance at End - Balance at Beginning | |||
Arbitrage profit = $11147.18819 - $11,000 | |||
Arbitrage profit = $147.18819 | |||
Arbitrage profit = $147.19 | |||
Please feel free to ask if anything about above solution in comment section of the question. |
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