New York simultaneously calls Citibank in New York City and Barclays in London. The banks give the following quotes on the euro simultaneously. Citibank NYC Barclays London Bid: $0.7551 = €1.00 Bid: $0.7545 = €1.00 Ask: $0.7561 = €1.00 Ask: $0.7575 = €1.00 Using $1 million or its euro equivalent, show how the corporate treasury could make geographic arbitrage profit with the two different exchange rate quotes.

New York simultaneously calls Citibank in New York City and Barclays in London. The banks give the following quotes on the euro simultaneously. Citibank NYC Barclays London Bid: $0.7551 = €1.00 Bid: $0.7545 = €1.00 Ask: $0.7561 = €1.00 Ask: $0.7575 = €1.00 Using $1 million or its euro equivalent, show how the corporate treasury could make geographic arbitrage profit with the two different exchange rate quotes.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

9th Edition

ISBN:9781305635937

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter17: Multinational Financial Management

Section: Chapter Questions

Problem 2DQ

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