Assume that you can buy 245 Canadian dollars with 100 British pounds.How much profit can you earn on a triangle arbitrage given the following rates if you start out with 100 U.S.dollars? $\begin{array}{llcc}
\text {Country } &U.S. \$ \text {Equivalent }& \text {Currency per U.S. \$ } \
\text { Canada } &?&1.3500\
\text {U.K. } &1.8305&?\
\end{array}$

Question

Assume that you can buy 245 Canadian dollars with 100 British pounds.How much profit can you earn on a triangle arbitrage given the following rates if you start out with 100 U.S.dollars? $\begin{array}{llcc}
  \text {Country   } &U.S. \$ \text {Equivalent }& \text {Currency per U.S. \$ } \
 \text { Canada } &?&1.3500\
 \text {U.K.   } &1.8305&?\
\end{array}$

Quizplus · Accepted Answer

The correct answer is A because the profit is $0.86.To calculate the profit, we first need to convert the 100 U.S. dollars to Canadian dollars. We can do this by multiplying the 100 U.S. dollars by the exchange rate of 1.3500. This gives us 135 Canadian dollars.Next, we need to convert the 135 Canadian dollars to British pounds. We can do this by multiplying the 135 Canadian dollars by the exchange rate of 0.6000. This gives us 81 British pounds.Finally, we need to convert the 81 British pounds back to U.S. dollars. We can do this by multiplying the 81 British pounds by the exchange rate of 1.8305. This gives us 148.66 U.S. dollars.The profit is the difference between the amount of money we started with and the amount of money we ended up with. In this case, the profit is 148.66 U.S. dollars - 100 U.S. dollars = $0.86.

Assume That You Can Buy 245 Canadian Dollars with 100