18 An international concert promoter receives US$1 million in ticket revenue from overseas and needs to convert the funds into British pounds to pay venue rental fees. The finance manager observes the following three spot exchange rates:
US$1 = €0.8
€1 = £0.7
US$1 = £0.5
Assume that transactions can be conducted simultaneously in all three markets and that there are no transaction costs, bid–ask spreads, or quantity restrictions. Which of the following is correct?
(A) There is no arbitrage opportunity.
(B) The arbitrage profit is US$120,000.
(C) The arbitrage profit is £50,000.
(D) Whether a triangular arbitrage opportunity exists is not related to the British pound exchange rate.