A dealer provides the following quotes:
Another dealer is quoting the ZAR/SEK cross-rate at 1.1210. The arbitrage profit that can be earned is closest to:
- ZAR 3671 per million SEK traded.
- SEK 4200 per million ZAR traded.
- ZAR 4200 per million SEK traded.
C is correct. The ZAR/SEK cross-rate from the original dealer is (1.0218/0.9149) = 1.1168, which is lower than the quote from the second dealer. To earn an arbitrage profit, a currency trader would buy SEK (sell ZAR) from the original dealer and sell SEK (buy ZAR) to the second dealer. On 1 million SEK the profit would beSEK 1,000,000 × (1.1210 – 1.1168) = ZAR 4200
i quite dont get why it is 4200 zar and not 4200 sek?