Question

Assume the following information: Philippine Peso AF Bank LifeStore Bank Bid Price $.0192 $.0186 Ask Price $.0197 $.0189 Assuming you have $1,000,000 to invest, what would your profits (in dollars) be from Locational Arbitrage? If it is not possible to profit, answer 0. Round your answer to the nearest whole number and don't use commas or currency signs. If your answer is negative, indicate that with a dash in front of the number (ie. -98026). Answer:

Answer 1

Quotes for Philippine Peso:

	AF Bank	Life Store Bank
Bid	0.192	0.186
Ask	0.197	0.189

I can buy Philippine Peso from Life Store Bank at 0.189 and sell it to AF Bank at 0.192

Therefore if I have $1,000,000 to invest, I can buy 1000000/0.189 = Peso 5,291,005.29

I can sell the same at $0.192. Therefore sales proceeds = Peso 5,291,005.29 x 0.192

Sales Proceeds = 1,015,873.02

Therefore Arbitrage Gains = $1,015,873.02 - $1,000,000

Therefore Arbitrage Gains = $15,873.02

Thumbs up please if satisfied. Thanks :)

Comment if further doubts in above.