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home / study / business / finance / finance questions andanswers / a) assuming triangular arbitrage is not possible andexchange rates are priced efficiently, ...

Question: A)      Assumingtriangular arbitrage is not possible and exchange rates...

a)      Assuming triangular arbitrageis not possible and exchange rates are priced efficiently, use thefollowing quotes to determine the percentage change in the NZDagainst the JPY.

Today

1 year ago

AUD NZD

1.0362

1.0965

AUD JPY

71.85

74.65

                                                  

b)     You have the following quotes fromthree different banks:

Big Time Bank

71.85 JPY AUD

Fack Bank

0.9601 AUD NZD

Trusty Bank

69.99 JPY NZD

If you can buy or sell at the given quotes, how much profit canyou make using AUD $1 000 000. Clearly show each of your trades andgive your profit inAUD.        

Answer & Explanation Solved by verified expert
4.3 Ratings (699 Votes)
aApplying the concept of Cross rate we can find the price of NZD in terms of JPY ie JPY per NZD or JPYNZD Currency Pair Today 1Year Ago NZDAUD 10362 10965 JPYAUD 7185 7465    See Answer
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