Final answer:
Triangular arbitrage is a profit opportunity arising from exchange rate inconsistencies across three currencies. By converting $1,000,000 USD to GBP, then to EUR, and back to USD, the investor ends up with $505,418.65, realizing a profit.
Step-by-step explanation:
The student is asking about a triangular arbitrage opportunity which is a situation where a discrepancy in exchange rates between three currencies can be exploited for a profit. The arbitrage involves converting one currency to another, then a third, and finally back to the original currency, ending with more than the initial amount. To calculate it, we need to assess the cross rate implied by two direct rates and compare with the direct rate provided. For the given rates:
1. Convert $1,000,000 to GBP at 1.92 USD/GBP = GBP 520,833.33
2. Convert GBP 520,833.33 to EUR at 1.46 GBP/EUR = EUR 380,164.40
3. Convert EUR 380,164.40 to USD at 1.33 USD/EUR = $505,418.65
Final answer in two lines
: The triangular arbitrage results in a profit, as the investor can start with $1,000,000 and end up with $505,418.65 after executing the currency trades.