As an employee of the foreign exchange department for a large company, you have been given the

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As an employee of the foreign exchange department for a large company, you have been given the following information:

Beginning of Year

Spot rate of £ = $1.596

Spot rate of Australian dollar (A$) = $.70

Cross exchange rate: £1 = A$2.28

One-year forward rate of A$ = $.71

One-year forward rate of £ = $1.58004

One-year U.S. interest rate = 8.00%

One-year British interest rate = 9.09%

One-year Australian interest rate = 7.00%

Determine whether triangular arbitrage is feasible and, if so, how it should be conducted to make a profit.

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International financial management

ISBN: 978-0324593471

9th Edition

Authors: Jeff Madura

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Question Posted: Jun 05, 2012 02:29 AM

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As an employee of the foreign exchange department for a large company, you have been given the

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Triangular arbitrage is not feasibl...View the full answer

International financial management

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