Differences in spot exchange rates

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1. Suppose that you work for the CFO of the James Company. The James Company does business in both U.S. dollars and in Polish zloty, so it regularly carries bank account balances in both currencies. The James Company observes differences in spot exchange rates for the zloty in terms of U.S. dollars at the two banks it regularly uses, and is considering whether it should try to profit from arbitrage. 

 

Alpha Bank

Beta Bank

Bid

$0.224

$0.228

Ask

$0.227

$0.229

a. James Company's CFO has approved using either $100,000 or 400,000 zloty for arbitration profits using Alpha Bank and Beta Bank. What profits, if any, can James Company make using these funds for arbitrage, if it moves quickly before exchange rates adjust?

Reference no: EM133062689

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