You have just completed transactions in England and Japan. Y…

You have just completed transactions in England and Japan. You are now holding £5,000,000 and ¥150,000,000 and need to convert to U.S. dollars. Your currency dealer provides these quotations: USD/GBP  1.2455 – 1.2460 GBP/¥  0.00526 – 0.00556 What are your proceeds after conversion?

Suppose the current bid and ask spot rate quotes are: $/£: …

Suppose the current bid and ask spot rate quotes are: $/£:  1.1125 – 30 $/€:  0.9885 – 95     a.  What cross rate bid and ask quotes in terms of €/£ do these prices suggest? (6 points)   b.  Suppose a dealer provides cross-rate bid and ask quotes of €/£:  1.1275 – 1.1290 Do these quotes suggest an arbitrage opportunity?   If yes, describe why that is the case. (4 points) c.  If there is an arbitrage opportunity, describe the strategy to exploit the opportunity and calculate the arbitrage profits. Start by borrowing 100 units in one currency and show that at the end of your trades you have more than you borrowed.  (8 points)