Assume you are a trader with JP Morgan. From the quote screen on your computer terminal, you notice that Bank A is quoting €0.8354/$1.00 and Bank Bis offering SF1.0913/$1.00. You learn that Bank Cis making a direct market between the Swiss franc and the euro, with a current €/SF quote of 0.7812(= €0.7812/SF). 

(1) Show how you can make a triangular arbitrage profit by trading at these prices. (Ignore bid-ask spreads for this problem.) Assume you have $1 million with which to conduct the arbitrage. How much is your dollar-based profit? (10points)

(2) What €/SF price will eliminate triangular arbitrage?(2points)

(3) What happens if you initially sell dollars for euros? (3 points)