L1 Arbitrage Question

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blackmagic

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There's an arbitrage question as the following.

Suppose the exchange rate in New york, London and Zurich are as below:

2.1$ for British Ponds in New Yori, 3.5 Franc a British Pond in London and 0.63 $ for a Franc in Zurich. Starting from buying 1,000,000 Franc in Zurich, then exchange to Ponds in London and finally exchange to US Dollars in New York, how much does this arbitrage gain/loss in US Dollars.

My calculation was loss 3000 USD but I couldn't find exact answers from the options. Could U guys know the correct answer?
 
I calculate 47,620 loss and I think it was one of the choices.
 
I thought the question said you used $1,000,000 to buy francs with in Zurich. Not 1,000,000 francs. You then ended with $'s in New York.



Post Edited (Monday, June 7 @ 9:35 am)
 
It was a loss of $70-odd thousand dollars. I checked on this one with someone else already. Weirdly enough, all you had to do was follow the triangle around with their instructions. Too easy!
 
Thanks you guys. I now unsderstand where I got it wrong.
 
I guess I should've studied the currency stuff a little harder



Post Edited (Monday, June 7 @ 10:10 pm)
 
i agree 47620 loss there is an easy way to solve it, you just can convert all the currency rate to dc/fc and just get the staigntforward answer
 
I think that's what I got. It was the smaller of the two losses (smaller as in 'closest to zero').
 
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