Hewitt Bank quotes a value for the Japanese yen (¥) of $0.007, and a value for the Canadian dollar (C$) of $0.821. The cross exchange rate quoted by the bank for the Canadian dollar is ¥118.00. You have $5,000 to conduct triangular arbitrage. How much will you end up with if you conduct triangular arbitrage?

$5030.45

Explanation:

Triangular arbitrage results when there is a discrepancy in the exchange rate of 3 foreign currencies. Traders can make a lot of money if they see this opportunity correctly.

Given:

Dollars to Yen  >>>   $0.007 = ¥ 1

Dollars to CAD  >>>  $0.821 = 1 CD

CAD to Yen  >>>  1 CD = ¥ 118

Now, you have $5000,

Converting to CAD:

5000/0.821 = 6090.13 CAD

Converting to Yen:

6090.13 CAD * 118 = ¥ 718635.81

Converting back to USD:

¥ 718635.81 * 0.007 = $5030.45

So, you end up with $5030.45 from this triangular arbitrage opportunity.

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