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  3. 8*) say that you observed the three following exch

8*) Say that you observed the three following exchange rates prevailing in a market. $1 =... 8*) Say...

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Finance

8*) Say that you observed the three following exchange ratesprevailing in a market.

$1 = SKr7.3068                   €1 = $1.2572                                   €1 = SKr 9.4541

Can you see an opportunity for arbitrage? Explain thesteps.

If so, assuming that you have $1m to invest, what is theprofit you can earn from pursuing your strategy (once)?

(assume no transaction costs and no bid-ask spreads etc)

Hint: if you are stuck, try to work out what the €-SKr rateshould be.

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8*) Say that you observed the three following exchange ratesprevailing in a market.$1 =...8*) Say that you observed the three following exchange ratesprevailing in a market.$1 = SKr7.3068                   €1 = $1.2572                                   €1 = SKr 9.4541Can you see an opportunity for arbitrage? Explain thesteps.If so, assuming that you have $1m to invest, what is theprofit you can earn from pursuing your strategy (once)?(assume no transaction costs and no bid-ask spreads etc)Hint: if you are stuck, try to work out what the €-SKr rateshould be.

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