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Anna specializes in cross-rate arbitrage. She notices the following quotes: Assume that she has $1 million available...

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Finance

Anna specializes in cross-rate arbitrage. She notices thefollowing quotes:

Assume that she has $1 million available to conduct thearbitrage, show how much Anna can make a triangular arbitrageprofit by trading at these prices.

What yen/euro price will eliminate the triangular arbitrageopportunity?

1. Bank 1:Yen / US dollar = JPY 108.0000 / USD

2. Bank 2: US dollar / euro = USD 1.1200/ EUR

3. Bank 3: Yen / EUR = JPY 124.0000 / EUR

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Transcribed Image Text

Anna specializes in cross-rate arbitrage. She notices thefollowing quotes:Assume that she has $1 million available to conduct thearbitrage, show how much Anna can make a triangular arbitrageprofit by trading at these prices.What yen/euro price will eliminate the triangular arbitrageopportunity?1. Bank 1:Yen / US dollar = JPY 108.0000 / USD2. Bank 2: US dollar / euro = USD 1.1200/ EUR3. Bank 3: Yen / EUR = JPY 124.0000 / EUR

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