You are an Australian treasurer with AUD1,000,000 to invest. The Australian dollar-euro exchange rate is quoted...
You are an Australian treasurer with AUD1,000,000 to invest. The Australian dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.25, how much money can an astute trader make?
Select one:
a. AUD 250,000
b. AUD 500,000
c. AUD 1,160,000
d. No arbitrage profit is possible
Homework Answers
Cross over rate using individual exchange rates = 2/1.6 = 1.25
Given cross over rate is same at 1.25
No arbitrage profits are available.
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You are an Australian treasurer with AUD1,000,000 to invest. The
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