a) National bank quotes the following for the british pound and the new Zealand dollar:

	quoted	quoted
	bid price	ask price
Value of an British pound ( ) in $	1.61	1.62
value of NZ dollar in $	0.55	0.56
value of BP in NZ dollars	2.95	2.96

What is the impact of triangular arbitrage on the quotes above?

Clearly state which quotes will increase or decrease. Clearly state whether each quote is a bid or ask price.

b. National Bank quotes the following for the British pound and the Australian dollar

	Quoted Bid Price	Quoted Ask Price
Value of an British pound ( ) in $	$1.61	$1.62
Value of an Australian dollar (A$) in $	$.85	$.86
Value of an Australian dollar in British pounds	0.54	0.55

Calculate the cross rates for the British pound () in $, both bid and ask. Of the six trades available above, which three trades result in a profit?

Show how you calculate the two cross rates. Make sure that it is clear which currency you are buying or selling and whether it is at the bid or ask price.