In New York, you can exchange $1 for €0.7538 or £0.6789. In Berlin, £1 costs €1.1087. How much profit can you earn on $5,000 using triangle arbitrage?

Question

Quizplus · Accepted Answer

First, convert $5,000 to pounds in New York: $5,000 * £0.6789 = £3,394.5. Then, convert £3,394.5 to euros in Berlin: £3,394.5 * €1.1087 = €3,764.77. Finally, convert €3,764.77 back to dollars in New York: €3,764.77 / €0.7538 = $4,992.67. The profit is $4,992.67 - $5,000 = $7.33.

In New York, You Can Exchange $1 for €0