ARBITRAGE AND PARITY CONDITIONS Part I. 1. Given the following two sets of quotations by two currency dealers: Dealer A Dealer B Bid Ask Bid Ask $1.1240/ $1.1460/ $1.1100/ $1.1320/ a State by observation, without any calculations or explaining the transactions (that's coming in part b), whether these two sets of quotations are out of equilibrium to a degree that would lead to an arbitrage opportunity in the absence of any transaction costs beyond the bid/ask spread b. Prove your point by narrating the trading activities that you need to perform and by calculating arbitrage profit if you start with a nominal sum of $25 million. 2. Given the following three currency quotes given by a U.S. bank and a London bank: $1.0641/SF 0.7940/SF I $1.3080/ Please answer parts (a) and (b) in the order they are given. a Show whether there is an arbitrage opportunity implied in these three quotes. b. Starting with a nominal $34 million, show how much arbitrage profit (if any) you can make by trading the currencies at the given rates