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Arbitrage to profit from these three rates

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Reference no: EM131489522

You have access to the following three spot exchange rates:

$0.01/yen $0.20/krone 25 yen/krone

You start with dollars and want to end up with dollars.

a. How would you engage in arbitrage to profit from these three rates? What is the profit for each dollar used initially? 

b. As a result of this arbitrage, what is the pressure on the cross-rate between yen and krone? What must the value of the cross-rate be to eliminate the opportunity for triangular arbitrage?

Reference no: EM131489522

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