Question

The exchange rates in New York for $1 are Can$1.1013 or £.7317. In Toronto, Can$1 will buy £.6733. How much profit can you earn on $11,500 using triangle arbitrage?

• $154.11

• $192.64

• $162.22

• $145.55

• $142.25

Answer 1

Sol:

First convert Dollar into Can$ and you will get $11,500 x Can$1.1013 = Can$12,664.95

Now convert Can$ into Pound and you will get Can$12,664.95 x £0.6733 = £8,527.3108

Now convert Pound into USD and you will get £8,527.3108 / £0.7317 = $11,654.1080

Arbitrage profit will be = $11,654.1080 – $11,500 = $154.11

Therefore profit you can earn using triangle arbitrage will be $154.11