Today's spot rates are U.S. $0.6879/Swiss franc and U.S. $1.5583/British pound sterling. How many pounds must a

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Today's spot rates are U.S. $0.6879/Swiss franc and U.S. $1.5583/British pound sterling. How many pounds must a Swiss franc be able to buy such that a triangular arbitrage will not exist?

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International Economics Theory and Policy

ISBN: 978-0134519579

11th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz

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Posted Date: Nov 18, 2023 03:06 AM

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Today's spot rates are U.S. $0.6879/Swiss franc and U.S. $1.5583/British pound sterling. How many pounds must a

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Expert Answer:

To check for the possibility of triangular arbitrage we can use the given exchange rates to determine a cross rate between Swiss francs CHF and British pounds GBP via the US dollar USD as an intermediary currency First lets calculate the implied CHFUSD exchange rate ... View the full answer

International Economics Theory and Policy

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