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Chapter 7

Q. 7.ST.1

Assume that the following spot exchange rates exist today:
£1 = $1.50
C$ = $.75
£1 = C$2
Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to earn a profit? Explain.

Step-by-Step

Verified Solution

No. The cross exchange rate between the pound and the C$ is appropriate, based on the other exchange rates. There is no discrepancy to capitalize on.