Top 4 Two Point Arbitrage Questions You Need To Solve


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TWO POINT ARBITRAGE:

 

Q.1) The buying rate for SFr spot in New York is $0.7884.

A corporate treasurer is going to buy SFr in Zurich at 1.2589 SFr per $ and sell them in     New York. Would you advise to go ahead on this transaction?

(Ans.: No. Loss 0.0075$ / $ OR Loss of 7483 $/1 million$)

 

Q.2) Two banks are quoting following US dollar rates:

Bank A:  47.7530/7610

Bank B:  47.7650/7730

Find out the arbitrage possibilities. Calculate it for 1 million USD.

(Ans.: 83.7503 $)

 

Q.3) In London, a dealer quotes:

DM per UK Pound Spot 3.5250/55.

¥ per UK Pound Spot 180.0080/181.0030.

What do you expect the ¥ per DM rate in Frankfurt?

If in Frankfurt you get a quote ¥ per DM spot 51.1530/51.2550, is there an arbitrage opportunity?

(Ans.: 51.0589 – 51.3484, No arbitrage opportunity)

 

Q.4) Two banks are quoting following US$ rates:

Bank A:  44.1025/44.2050

Bank B:  44.3075/44.4000

Find out arbitrage gain in Rupees per one mil US$ investment.

(Ans.: 2,318)

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We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

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