You have the following quotations on the Chinese yuan (CNY) against the Australian dollar (A$) at the HSBC Bank in China and National Australia Bank in Australia

Finance Dec 10, 2020

You have the following quotations on the Chinese yuan (CNY) against the Australian dollar (A$) at the HSBC Bank in China and National Australia Bank in Australia. Can you make a locational arbitrage profit? If yes, calculate the arbitrage profit in percentage. (enter two decimal number without sign or symbol) Currency HSBC in China National Australia Bank in Australia Bid Ask Bid Ask Chinese yuan A$0.3043 A$0.3291 A$0.3474 A$0.3613

Expert Solution

Yes arbitrage is possible here.

We will buy CNY at HSBC in China @ A$0.3291

and sell CNY at National Australian Bank in Australia @ A$0.3474

Therefore net gain will be 0.3474 - 0.3291 = A$0.0183

In percentage = 0.0186/0.3291 * 100 = 5.56%

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