You are a U.S.-based investor with $2,500,000 to invest. The dollar-euro exchange rate is quoted as...
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You are a U.S.-based investor with $2,500,000 to invest. The dollar-euro exchange rate is quoted as $1.50/€ and the dollar-pound exchange rate is quoted at $2.00/£. If a bank quotes you a cross rate of €1.25/£, demonstrate if you can make money via triangular arbitrage. Explain all steps in detail and show computations. You are a U.S.-based investor with $2,500,000 to invest. The dollar-euro exchange rate is quoted as $1.50/€ and the dollar-pound exchange rate is quoted at $2.00/£. If a bank quotes you a cross rate of €1.25/£, demonstrate if you can make money via triangular arbitrage. Explain all steps in detail and show computations.
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