1)(4 pts) Locational Arbitrage. Assume the following information:

Beal BankYardley Bank

Bid price of New Zealand dollar$.401$.398

Ask price of New Zealand dollar$.404$.400

Given this information, is locational arbitrage possible? If so, explain the steps involved in locational arbitrage, and compute the profit from this arbitrage if you had $1,000,000 to use. What market forces would occur to eliminate any further possibilities of locational arbitrage?

2)(5 pts) Triangular Arbitrage. Assume the following information:

QuotedPrice

Value of Canadian dollar in U.S. dollars$.90

Value of New Zealand dollar in U.S. dollars$.30

Value of Canadian dollar in New Zealand dollarsNZ$3.02

Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage, and compute the profit from this strategy if you had $1,000,000 to use. What market forces would occur to eliminate any further possibilities of triangular arbitrage?