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Is there opportunity to arbitrage for an American investor

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Reference no: EM133041909

Question - A dealer in South Africa quotes $ 0.1550-75/BWP for the Botswana Pula. A dealer in France quotes €0.1040-70/BWP. Another dealer quotes $1.4350-65/€ in New York.

a) Is there an opportunity to arbitrage for an American investor? Use $1,000,000 as the notional amount. Show all work.       

b) Explain how the exchange rates will adjust to reach equilibrium and eliminate any arbitrage opportunities.

Reference no: EM133041909

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