Based on the information in the previous question, what market forces would occur to eliminate any further possibilities of the locational arbitrage described in your answer to Question.
Question:-
Assume the following information:
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Bank X
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Bank Y
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Bid price of Swiss francs
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$.401
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$.398
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Ask price of Swiss francs
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$.404
|
$.400
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Given this information, is arbitrage possible?
If so, explain the steps that would create the arbitrage. Compute the profit from this arbitrage if you had $1,000,000 to use.