Question

Assume you have $3,000 to invest in a triangular arbitrage transaction, what is your best course of action based on the following exchange rates? In Zagreb, $1 = 5.9935 HRK In New York, $1 = 4.9923 BRL In San Paulo, 1 BRL = 3.125 HRK

Answer 1

To determine the best course of action for a triangular arbitrage transaction with $3,000, convert the dollars to Brazilian reals and then to Croatian Kuna, and finally convert it back to USD, resulting in a profit of approximately $4,800.86.

Step-by-step explanation:

To determine the best course of action for a triangular arbitrage transaction with $3,000, we need to calculate the potential profit based on the exchange rates given. Let's start by converting the dollars to Brazilian reals and then to Croatian Kuna:

1. Convert $3,000 to BRL by multiplying it with the exchange rate in New York:
   $3,000 * 4.9923 BRL/$1 = 14,976.9 BRL
2. Convert BRL to HRK by multiplying it with the exchange rate in San Paulo:
   14,976.9 BRL * 3.125 HRK/1 BRL = 46,803.9 HRK
3. Convert HRK back to USD by dividing it by the exchange rate in Zagreb:
   46,803.9 HRK / 5.9935 HRK/$1 = $7,800.86

Therefore, the best course of action would be to start with $3,000, convert it to BRL, then to HRK, and finally convert it back to USD, resulting in a profit of approximately $4,800.86.