Eliminate the arbitrage opportunity

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Suppose you observe the following quotes in the FX market: MP12/USD, ACR: MP15/BP, USD1.50/BP Find the maximum triangular arbitrage profit (in terms of dollars) to someone with access to 10 million dollars at a 3% interest rate. Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols or words when entering your answer.

Which of the following will occur to eliminate the arbitrage opportunity you found in the previous question?

The dollar will appreciate against the peso.

The peso will depreciate against the pound.

The pound will appreciate against the dollar.

No adjustments are necessary because triangular arbitrage is not possible.

None of the above.

Reference no: EM131526526

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