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Locational arbitrage. Assume the following information:
Beal Bank Yardley Bank
Bid price of New Zealand dollar $.401 $.398
Ask price of New Zealand dollar $.404 $.400

Given this information, is locational arbitrage possible?

If so explain the steps involved in locational arbitrage, and compute the profit from this arbitrage if you had $1 million to use. What market forces would occur to eliminate any further possibilities of locational arbitrage?


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Dear Student, Please find the solution attached. Regards View the full answer

6878647.doc

Locationalarbitrage.Assumethefollowinginformation:
BealBankYardleyBank
BidpriceofNewZealanddollar$.401$.398
AskpriceofNewZealanddollar$.404$.400
Giventhisinformation,islocationalarbitragepossible?...

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