Pegged exchange rate is used by certain countries, in which their home currency's value is attached to

one foreign currency or to an index of currencies. The home currency's value is expressed in the terms
of the foreign currency to which it is pegged or attached, It moves parallel with that currency against
other currencies.

Due to pegged exchange rate, the rate is expected to remain stable which consequently might attract
foreign investment. The weak economic or political conditions can cause firms and investors to question
whether the peg will hold. if a country suddenly faces poor economic condition some firms and investors
withdraw their investments if they find a better investment opportunity in other countries, therefore
the country may experience capital outflows. The exchange of the local currency for dollars and other
currencies, results in downward pressure on the local currency value. The central bank would need to
overcome this by intervening in the foreign exchange market but might not be able to maintain the peg.
If the peg is not maintained and the exchange rate is influenced by market forces, the local currency's
value could decline immediately by 20% or more.

If foreign investors are doubtful that peg may not be maintained or broken, they quickly withdraw their
investments in that country and invest the sales proceeds into their home currency, this result in more
downward pressure on the local currency of that country Even the residents of that country may
consider selling their local investments and converting their funds to dollars or some other currency if
they fear that the peg may break. They can exchange their currency for dollars to invest in the United
States before the beg breaks and keep the investment in dollars until they sense a good sign. Then they
can sell their investments in the and convert the dollar proceeds back to their currency at a more
favorable exchange rate Due to major political or economic problems countries face difficulty in
maintaining a pegged exchange rate. While a country with a stable exchange rate can attract foreign
investment, the investors will withdraw their funds to another country if there are concerns that the peg
will break. Thus, a pegged exchange rate system could ultimately create more instability in a country's
economy.

Yes, triangular arbitrage is possible as per given information.

Given $1,000,000 in hand, following would be the steps to execute triangular arbitrage strategy.

1. Convert $1,000,000 into CAD at the given rate of CAD/USD = 1/9, which arrives to CAD 1,111,111

2. Convert CAD1,111,111 into NZ$ at the given rate of NZS/CAD = 3.02, which arrives at NZ$ 3,355,556

3. Now finally, convert NZ$ 3,355,556 into USD at the given rate of USD/NZ$ = 30, which arrives at
1,006,667 Therefore, triangular arbitrage leads to a profit of $6,667

Market forces that would occur to eliminate any further possibilities of triangular arbitrage:

Value of CAD with respect to USD would rise.

Value of NZD with respect to CAD would increase.

Value of NZD with respect to USD would decrease.

Therefore, arbitrage opportunity as present in this case would be eliminated.