a. Suppose that Bank A quotes the exchange rates as: $1.25/ Bid and $1.27/ Ask; and Bank B quotes the FX rates: $1.28/ Bid and $1.29/ Ask given the same time period. Present the location arbitrate strategy and its profit. Assume that you start with 1million.

b. Suppose that the exchange rate of E in $ is given: SE/$=E4.00/$, but all other rates are the same . First show that the triangular arbitrage is possible. Then, present the arbitrage strategies and its profit in E. R

c. Suppose that the forward rate of in $ is given: F1$/=$1.20/, but all other values are the same (see Slide #21).

First show that the covered interest arbitrage is possible. Then, discuss the arbitrage strategies and its profit in $.