Question: Triangular Arbitrage Using the Swiss Franc. The following exchange rates are available to you. (You can buy or sell at the stated rates.) Assume you

Triangular Arbitrage Using the Swiss Franc. The following exchange rates are available to you. (You can buy or sell at the stated rates.) Assume you have an initial SF12,000,000. Can you make a profit via triangular arbitrage? If so, show the steps and calculate the amount of profit in Swiss francs.

Mt. Fuji Bank	92.00/$
Mt. Rushmore Bank	SF1.02/$
Mt Blanc Bank	90.00/SF

2.Nominal Effective Exchange Rate Index. Explain how a nominal effective exchange rate index is constructed.

3.Real Effective Exchange Rate Index. What formula is used to convert a nominal effective exchange rate index into a real effective exchange rate index?

4.Exchange Rate Pass-Through. Incomplete exchange rate pass-through is one reason that a countrys real effective exchange rate can deviate for lengthy periods from its purchasing power equilibrium level of 100. What is meant by the term exchange rate pass-through?

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