Question 3 Profit opportunities arise from cross rate differences between financial centres On 9 th September 2020, you noticed the following FX rates of various banks Amato Bank quotes Japanese yen per Australian dollar (Yen A$) 82 00 Sanio Bank quotes Japanese yen per SFr (Yen SFr) 97 00 XYZ Bank quotes Swiss franc (SFr) per Australian dollar (SFr A$) 1 15 i) Is there any arbitrage opportunity Calculate the relevant cross rate that may lead to arbitrage profit ii) Using a hypothetical amount of A$1,000,000 to invest, show how an investor can make arbitrage profit

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Question: Question 3 Profit opportunities arise from cross rate differences between financial centres. On 9 th September 2020, you noticed the following FX rates of various

Question 3

Profit opportunities arise from cross rate differences between financial centres. On 9^th September 2020, you noticed the following FX rates of various banks:

Amato Bank quotes Japanese yen per Australian dollar (Yen/A$)	82.00
Sanio Bank quotes Japanese yen per SFr (Yen/SFr)	97.00
XYZ Bank quotes Swiss franc (SFr) per Australian dollar (SFr/A$)	1.15

i) Is there any arbitrage opportunity? Calculate the relevant cross rate that may lead to arbitrage profit.

ii) Using a hypothetical amount of A$1,000,000 to invest, show how an investor can make arbitrage profit.

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