You have contacted your bank and they have provided you with the following exchange rate quotations.
a. The value of the Japanense Yen in US dollars is $.00885
b. The value of the Mexico Peso in US dollars is $0.769
c. The value of the Mexican Peso in yen is y8.00
You have $10,000 and are looking to determine if there is a triangular arbitrage opportunity at your bank. Which one of the following statements is correct?
1. There is an arbitrage opportunity where you could earn $307 risk free
2. There is an arbitrage opportunity where you could earn $862 risk free
3. There is an arbitrage opportunity where you could earn $1,258
4. There is no arbitrage opportunity as the exchange rates are equilibrium.