Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/U.S. dollar = 1.5971 CHF/USD Australian dollar/U.S. dollar = 1.8215 AUD/USD Australian dollar/Swiss franc = 1.1300 AUD/CHF Does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, how much would he profit if he has $1,000,000 USD? A. No, there is no profitable arbitrage opportunity. B. Yes, he can make $9,296 USD profit. C. None is correct. D. Yes, he can make $8,573 USD profit.
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/U.S. dollar = 1.5971 CHF/USD Australian dollar/U.S. dollar = 1.8215 AUD/USD Australian dollar/Swiss franc = 1.1300 AUD/CHF Does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, how much would he profit if he has $1,000,000 USD? A. No, there is no profitable arbitrage opportunity. B. Yes, he can make $9,296 USD profit. C. None is correct. D. Yes, he can make $8,573 USD profit.
Chapter9: Forecasting Exchange Rates
Section: Chapter Questions
Problem 1BIC
Related questions
Question
Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes:
Swiss franc/U.S. dollar = 1.5971 CHF/USD
Australian dollar/U.S. dollar = 1.8215 AUD/USD
Australian dollar/Swiss franc = 1.1300 AUD/CHF
Does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, how much would he profit if he has $1,000,000 USD?
A. |
No, there is no profitable arbitrage opportunity. |
|
B. |
Yes, he can make $9,296 USD profit. |
|
C. |
None is correct. |
|
D. |
Yes, he can make $8,573 USD profit. |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you