To answer this question, we first need to understand what arbitrage is. Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.

Step 1: Identify the exchange rates on 1/6/2023
From the table, we can see that on 1/6/2023, the closing prices were:
- AUD/LTC: 128.12
- USD/LTC: 108.17

Step 2: Identify the spot rate quotation on 1/6/2023
The spot rate quotation from a foreign exchange dealer was AUD1.5106/USD.

Step 3: Check for arbitrage opportunity
An arbitrage opportunity exists if the price of Litecoin in AUD, converted to USD, is different from the price of Litecoin in USD.

Let's convert the price of Litecoin from AUD to USD:
AUD/LTC * USD/AUD = USD/LTC
128.12 * 1/1.5106 = 84.76 USD/LTC

Comparing this with the given USD/LTC rate of 108.17, we can see that there is indeed an arbitrage opportunity, as the price of Litecoin in USD is higher than the price of Litecoin in AUD converted to USD.

Step 4: Calculate the net profit from arbitrage
As an Australian investor who owns USD 1,000,000, you can buy Litecoin in AUD, then sell it in USD to make a profit.

First, convert your USD to AUD:
USD * AUD/USD = AUD
1,000,000 * 1.5106 = 1,510,600 AUD

Next, buy Litecoin with AUD:
AUD / AUD/LTC = LTC
1,510,600 / 128.12 = 11,787.77 LTC

Then, sell Litecoin for USD:
LTC * USD/LTC = USD
11,787.77 * 108.17 = 1,275,349.59 USD

Finally, calculate the net profit:
Profit = Final amount - Initial amount
Profit = 1,275,349.59 - 1,000,000 = 275,349.59 USD

So, the net profit from arbitrage would be 275,349.59 USD.

Question

To answer this question, we first need to understand what arbitrage is. Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.

Step 1: Identify the exchange rates on 1/6/2023
From the table, we can see that on 1/6/2023, the closing prices were:
- AUD/LTC: 128.12
- USD/LTC: 108.17

Step 2: Identify the spot rate quotation on 1/6/2023
The spot rate quotation from a foreign exchange dealer was AUD1.5106/USD.

Step 3: Check for arbitrage opportunity
An arbitrage opportunity exists if the price of Litecoin in AUD, converted to USD, is different from the price of Litecoin in USD.

Let's convert the price of Litecoin from AUD to USD:
AUD/LTC * USD/AUD = USD/LTC
128.12 * 1/1.5106 = 84.76 USD/LTC

Comparing this with the given USD/LTC rate of 108.17, we can see that there is indeed an arbitrage opportunity, as the price of Litecoin in USD is higher than the price of Litecoin in AUD converted to USD.

Step 4: Calculate the net profit from arbitrage
As an Australian investor who owns USD 1,000,000, you can buy Litecoin in AUD, then sell it in USD to make a profit.

First, convert your USD to AUD:
USD * AUD/USD = AUD
1,000,000 * 1.5106 = 1,510,600 AUD

Next, buy Litecoin with AUD:
AUD / AUD/LTC = LTC
1,510,600 / 128.12 = 11,787.77 LTC

Then, sell Litecoin for USD:
LTC * USD/LTC = USD
11,787.77 * 108.17 = 1,275,349.59 USD

Finally, calculate the net profit:
Profit = Final amount - Initial amount
Profit = 1,275,349.59 - 1,000,000 = 275,349.59 USD

So, the net profit from arbitrage would be 275,349.59 USD.

Knowee AI · Accepted Answer