Question

Assume the bid rate of an Australian dollar is $0.60 while the ask rate is $0.61 at Bank Q. Assume the bid rate of an Australian dollar is $0.62 while the ask rate is $0.625 at Bank V. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage?

Answer 1

Answer:

$16,393.44

Explanation:

Calculation for what would be your gain

Gain=$1,000,000/($0.61 per AUD)*$0.62 per AUD - $1,000,000

Gain=1,639,344*$0.62 per AUD - $1,000,000

Gain=$16,393.44

Therefore what would be your gain if you use $1,000,000 and execute locational arbitrage will be $16,393.44