Question of the Week

You observe the following exchange rates in the following markets: New York: 120yen/$, Tokyo: 57yen/DM and Frankfurt: 2.013DM/$. If a trader was to exploit the mispricing that existed, what would be his or her riskless profit in U.S. dollar terms if he or she could borrow $1,000,000?

A) $45,834
B) $73,842
C) $37,562
D) $52,291

Answer:

The correct answer is: a)