a) You are the trade advisor to a multinational company with an investment of US$1,500,000. The following are the rates quoted on the FOREX market:
US $ to Euro 1.22/ €
US $ to pounds 1.84/ £
Euros to pounds 1.54/ £
1. Calculate the cross rate and determine if a profit opportunity exists. What is the value of that profit if you decide to trade with the US$1.5 million.
2. If the starting amount is US$1,750,000, what is the Arbitrage profit which is generated if the exchange rate is ¥95.765/US$ and US$1.7542/£ and observed rate of ¥175/£.