Triangular Arbitrage Assume the U

Triangular Arbitrage Assume the U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.125. The U.S. dollar and Swiss Franc exchange rate is $1 = 1.235. If the cross rate between the franc and Canadian dollar is 1 franc = CA$0.9820, then show that an arbitrage is possible. What positions should be taken to profit from the mispricing?

A) Start with U.S. dollars, buy francs and convert them to Canadian dollars, then back to U.S. dollars.
B) Start with francs, buy U.S. dollars and convert them to Canadian dollars, then back to francs.
C) Start with Canadian dollars, buy francs and convert to U.S. dollars, then back to Canadian dollars.
D) Start with U.S. dollars, buy Canadian dollars and convert to francs, then back to U.S. dollars.

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