bserve the following quotes for $/. Exchange Rates One Year Interest Rates S $1.18/E is 2.696 p.a. F360 $1.25/ lc 1.6% p.a. What steps would you take to make an arbitrage pront? Borrow dollars, buy euro in the spot market invest euro, sell euro in the forward market. Borrow euro, sell euro in the spot market, invest dollars, buy dollars in the forward market. Borrow euros, buy dollars the spot market, Invest dollars, sell dollars in the forward market. Borrow dollars, sell euro in the spot market, invest euro, buy dollars in the forward market. Suppose that the bid ask spread for the actual cross rate between the British Pound and the Indian rupee is Rs80.25/ - Rs82.5555/ at the Bank of Calcutta. You have solved for the implied bid ask spread through the dollar quotes at another bank at Rs77.8352/E - R$80.00/. Is there an arbitrage opportunity based on these quotes? If so, how would you set up the arbitrage opportunity? Yes, you would buy Pounds (sell Rupees) through the dollar quotes and sell Pounds (buy Rupees) at the Bank of Calcutta, Yes, you would buy Dollars (sell Rupees) through the Bank of Calcutta and sell Dollars (buy Rupees) through the dollar quotes, There is no opportunity for arbitrage. Yes, you would buy Pounds (sell Rupees) through the Bank of Calcutta and sell Pounds (buy Rupees) through the dollar quotes