Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting EUR/USD at 1.2459 and Credit Suisse is offering USD/CHF at 0.8856. You learn that UBS is making a direct market between the Swiss franc and the euro, with a current EUR/CHF of 1.1047. (Ignore bid-ask spreads for this problem.) Assume you have $5,000,000 with which to conduct the arbitrage. What is the profit or loss if you initially buy Euros with your USD?
