What yen-euro price will eliminate triangular arbitrage

Assignment Help Financial Management
Reference no: EM131947901

Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes:

1. Credit Lyonnais: Yen / US dollar = JPY 111.0000 / USD

2. Barclays: US dollar / euro = USD 1.2200/ EUR

3. Credit Agricole: Yen / EUR = JPY 137.0000 / EUR

Ignoring transaction costs, show how much Doug Bernard can make a triangular arbitrage profit by trading at these prices. Assume that he has $1 million available to conduct the arbitrage and calculate the arbitrage profit in both $ and percentage terms, showing clearly the steps of the arbitrage.

What yen/euro price will eliminate the triangular arbitrage opportunity?

Reference no: EM131947901

Questions Cloud

What is the terminal or horizon-value of operations : What is the terminal, or horizon, value of operations? Calculate the value of Kendra's operations
Create a logical campus network for slugworth candies : IT 1080C Computer Networking Final Project: Slugworth Candies, LLC - create a logical2 campus network for Slugworth Candies, LLC. Each local area network
Provide one example of the equity theory of motivation : What level(s) of Maslow's Hierarchy of Needs is the person exhibiting? Suggest two and please explain.
Equilibrium with required return equal to expected return : What is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)?
What yen-euro price will eliminate triangular arbitrage : What yen/euro price will eliminate the triangular arbitrage opportunity?
Using the straight-line method for the interest deduction : What will these bonds sell for at issuance? Repeat part (b) using the straight-line method for the interest deduction.
Value of common shareholders equity : Calculate the 2015 value of common shareholders equity to Jake's Jamming Music, Inc.
How would you keep the stakeholders happy : There is a common phrase in business: "Cash is king." "Cash flow is the life-blood of a company. Without it, a company will fail"
Find the amount of payment using pmt financial formula : find the amount of the payment using the PMT financial formula in Excel and then set up the amortization table.

Reviews

Write a Review

Financial Management Questions & Answers

  Describe the competitive dynamics

How would you describe the competitive dynamics? Would you want to enter this market, why or why not?

  What will be effect of overstating the beginning inventory

Alpha Company's beginning inventory should have been $85,000, but instead, the bookkeeper listed it as $95,000. The manager told the bookkeeper not to "worry" about the mistake, because it would resolve itself in the following year. What will be the ..

  Stocks with the investments and individual betas

You hold a portfolio of three stocks with the following investments and individual betas. What is the portfolio beta?

  Concerned about corporate social responsibility

Criticall examine five (5) reasons to justify why strategist should be concerned about corporate social responsibility

  Bonds make annual payments-what is the current bond price

Lycan, Inc., has 8.8 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 10.8 percent, what is the current bond price?

  What are the company expected cash outflow

What are the company’s expected cash outflow from this order and when will they occur? Should the company accept this order? Explain.

  What is the amount of the cash flow from assets

Kiba Enterprises has an operating cash flow of $78,460, What is the amount of the cash flow from assets?

  Find the annual continuously compounded interest rate

The current price of a non-dividend-paying stock is $40. Find the annual continuously compounded interest rate r.

  Raina processes payroll at her company

Because Raina processes payroll at her company, she knows how much everyone earns, including the top executives.

  Building is exported to generate no cash flows

A building is exported to generate no cash flows for several years and then generate annual cash flows forever.

  Which is the more attractive investment

With an interest rate of 12%, which is the more attractive investment, given that they are equally risky? Investment A: An ordinary annuity of $5,000 for 5 years, followed by a two-­--year annuity of -­--$2,000; Investment B: An annuity due of $5,000..

  What was charge for depreciation and amortization

It had $2.0 million of interest expense, and its corporate tax rate was 35%. What was its charge for depreciation and amortization?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd