Assume you can exchange $1 for ¥110.23 or €0.86 in New York.In Tokyo, the exchange rate is ¥1 = €0.009.If you have $900, how much profit can you earn using triangle arbitrage?

Question

Quizplus · Accepted Answer

First, we need to calculate how many yen we can get with $1:
$1 = ¥110.23
Next, we need to calculate how many euros we can get with ¥1:
¥1 = €0.009
Now, we can use these exchange rates to see if triangle arbitrage is possible:
Starting with $900:
$900 * ¥110.23/$1 = ¥99,207
¥99,207 * €0.009/¥1 = €892.86
€892.86 * $1.15/€1 = $1,026.86
We started with $900 and ended up with $1,026.86, so our profit is:
$1,026.86 - $900 = $126.86
Finally, we need to convert this profit into yen:
$126.86 * ¥110.23/$1 = ¥13,986.88
So our total profit is ¥13,986.88 or approximately ¥13,987.
Therefore, the best choice is C.

Assume You Can Exchange $1 for ¥110