Help one uqestion

CFA Level I Economics
#1

A dealer provides the following quotes:

Ratio Spot rate
CNY/HKD 0.8422
CNY/ZAR 0.9149
CNY/SEK 1.0218

Question

Another dealer is quoting the ZAR/SEK cross-rate at 1.1210. The arbitrage profit that can be earned is closest to:

  1. ZAR 3671 per million SEK traded.
  2. SEK 4200 per million ZAR traded.
  3. ZAR 4200 per million SEK traded.

answer =

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?

#2

To begin with, the CNY/ZAR, CNT/SEK, and ZAR/SEK quotes are ridiculous; I wish that these authors would use accurate exchange rates.

SEK\ 1,000,000\left(\dfrac{ZAR\ 1.1210}{SEK\ 1.0}\right)\left(\dfrac{CNY\ 0.9149}{ZAR\ 1.0}\right)\left(\dfrac{SEK\ 1.0}{CNY\ 1.0218}\right) = SEK\ 1,003,722

Thus, the profit is SEK\ 3,722 or

SEK\ 3,722\left(\dfrac{ZAR\ 1.1210}{SEK\ 1.0}\right) = ZAR\ 4,172
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