Use the following 3 quotations for the following 3 questions on triangular arbitrage Quotation 1: AUD:...

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Use the following 3 quotations for the following 3 questions on triangular arbitrage Quotation 1: AUD:...

Use the following 3 quotations for the following 3 questions on triangular arbitrage

Quotation 1: AUD: USD0.74942

Quotation 2: HKD: USD0.12896

Quotation 3: HKD: AUD0.1800

If you start with USD 1 million and follow 1 round of arbitrage, how much in USD do you end up with (including your investment of 1 million)

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Answer 1

Answer #1

Start with USD 1000000

Convert to HKD as 1000000/0.12896 = 7754342.432 HKD

Convert to AUD as 7754342.432* 0.18 = 1395781.638 AUD

Convert AUD to USD as 1395781.638 AUD* 0.74942 = 1046026.67 USD

Final amount = 1046026.67 USD

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Answer 2

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