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5)Assume the following exchange rate quotes on British pounds: Bid Ask Orleans Bank $1.46 $1.47 Kansas Bank 1.48 1.49 Explain how locational arbitrage would occur.

5)Assume the following exchange rate quotes on British pounds:

Bid Ask

Orleans Bank $1.46 $1.47

Kansas Bank 1.48 1.49

Explain how locational arbitrage would occur. Also explain why this arbitrage will realign the exchange rates.

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