1. Suppose US Bank gives the following quotes: St = JPY 100 /USD St = USD 1.60 /GBP (1) How many Japanese Yen can be purchased with 1 British Pound? (2) If you learn that the cross rate quoted by US Bank is actually St= 140 JPY/GBP, what would be your triangular arbitrage profits if you could put $1 million into this arbitrage (ignore the possible interest on the $1million)?

a. St = 140 JPY/GBP; arbitrage profits = $132,857

b. St = 160 JPY/GBP; arbitrage profits = $142,857

c. St = 160 JPY/GBP; arbitrage profits = $152,857

d. St = 180 JPY/GBP; arbitrage profits = $152,857

2.Suppose one year ago, the spot quotation for the Japanese Yen was JPY 112/USD. Currently, the 6-month forward rate on the Japanese Yen is JPY 120/USD and the current spot rate is JPY 117/USD. Calculate the percentage change in exchange rates over the last year and the current premium/discount on the forward exchange rate.

a. percentage change = -4.27% ; forward premium/discount = -5.00%

b. percentage change = -4.27% ; forward premium/discount = -2.50%

c. percentage change = 4.46%; forward premium/discount = 5.13%

d. percentage change = 4.46% ; forward premium/discount = 2.56%