Take advantage of the arbitrage opportunity

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Reference no: EM131498820

Suppose that Bank 1 is quoting the Singapore dollar spot rate at 1.5 SGD/$, Bank 2 is quoting the Swiss franc spot rate at 1.25 SF/$, and Bank 3 is quoting the exchange rate between the Singapore dollar and the Swiss franc at 1.10 SGD/SF. If there is an arbitrage opportunity, then calculate the triangular arbitrage profit (in dollars) that is possible if you start with $1 million. Also clearly indicate the steps you would take to take advantage of the arbitrage opportunity.

Reference no: EM131498820

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