Answer-6:

Solution: Given;

Computation of Arbitrage Profits as follows:

       

    Option 1   Option 2  

Buy Euros
Buy Euros
from
from Citibank
  Particulars Detail Barclays and Detail
and sell to
sell to
Barclays
Citibank

  Buying Rate 1.2829   1.2825  

           

  Selling Rate 1.2824   1.2828  

           

  Amount ($) 2000000   2000000  

           

Buying
  1558967.963 2000000*1/1.2829 1559454.191 2000000*1/1.2825
Euros

           

Amount
  2000000   2000000  
invested

Less Selling
1999220.516 1558967.96*1.2824 2000467.836 1559454.191*1.2828
: Amount ($)

           

Arbitrage
1999220.516- 2000467.836-
  Profit / -779.4839816 467.8362573
2000000 2000000
(Loss)
Therefore, it could be concluded that the corporate treasury can make a geographic
arbitrage profit if it buys euros from Barclays London and sells the euros to Citibank
NYC.