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(a) Given the following information: Bid price of British pound (GBP) Ask price of British pound (GBP) Bank VIP MYR5.5280 MYR5.5330 Bank ABC MYR5.4117 MYR5.4820

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(a) Given the following information: Bid price of British pound (GBP) Ask price of British pound (GBP) Bank VIP MYR5.5280 MYR5.5330 Bank ABC MYR5.4117 MYR5.4820 Required: Based on the above information, is arbitrage possible? If so, explain the steps and compute the profit from this strategy if you have MYR5,000,000 to use. (6 marks) If the Canadian dollar spot rate is MYR3.2440 and its 1-year forward rate has a forward premium of 3.5%, calculate its 1-year forward rate. (3 marks) (b)

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