Suppose in Zurich £/$ = 0.5,while in New York SF/$ = 2.5,but in London £/SF = 0.1.
(a) Is there any arbitrage profit that could be made with a triangular arbitrage action? Describe an example of how such a profit may be earned.
(b) What would you guess about the relationship between the dollar rates and cross-rates after arbitrageurs notice this profit opportunity?

Question

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The Answer of Suppose in Zurich £/$ = 0.5,while in New York SF/$ = 2.5,but in London £/SF = 0.1.
(a) Is there any arbitrage profit that could be made with a triangular arbitrage action? Describe an example of how such a profit may be earned.
(b) What would you guess about the relationship between the dollar rates and cross-rates after arbitrageurs notice this profit opportunity?