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Q$3$ is worth $1$ mark

Q$3$: You work for a hedge fund and your job is to profit from possible arbitrages.

You have the following information today from a large international bank active in the financial markets.

The spot exchange rate for the number of Malaysian Ringgit $($MYR$)$ per Singapore dollar $($SGD$)$ is $3\mathrm{.}3925-3\mathrm{.}3935($bid$-$ask$).$

The Malaysian LIBOR $($annualized$)$ interest$-$rate applicable from today to $3$ months from now is $7\mathrm{.}0\%-7\mathrm{.}1\%$ per annum $($this is the bid$-$ask so$,$ for example, $7\mathrm{.}0\%$ is the rate at

which MYR can be deposited at the bank$).$

The Singaporean LIBOR $($annualized$)$ interest$-$rate applicable from today to $3$ months from now is $3\mathrm{.}5\%-3\mathrm{.}6\%$ per annum.

The three month forward exchange rate for the number of MYR per SGD is $3\mathrm{.}4260-3\mathrm{.}4280($this is the bid$-$ask$).$

Is there an arbitrage?

If you are allowed by your boss at the hedge fund to borrow $21$ mio MYR $($this is the risk capital and you have to repay this with interest$),$ how much arbitrage profit $($i$.$e$.,$

guaranteed risk$-$free profit$)$ can you make? $($mio means million.$)$

Give your answer in MYR to the nearest MYR$.$ Assume three months is exactly $0\mathrm{.}25$ years. If there is no arbitrage, enter zero.

Do not round until the end or $($even better$)$ do your calculation in Excel.

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