calculating exchange rates. calculating what transactions need to be made to get arbitrage profit.

AVO95% 103:16 2020BE630-6-AU-RESIT - Saved ... Graph warmbley Oct Graph 2 v BE630-6-SP-RESIT 5 (b) What is the difference between bilateral exchange rate and effective exchange rate? Which is the best? (5 Marks) (c) (0) Let the spot rate between UK and US be 0.614 GBP/USD. Further, the spot rate between France and US be 0.6963 EUR/USD. Calculate the GBP/EUR exchange rate. (5 Marks) Let the market quoted AUD/EUR exchange rate be 1.4152 AUD/EUR, instead of 1.5572 AUD/EUR. Using the information in (c() and the exchange rate of AUD/USD as 1.0843, show what transactions you would make to make an arbitrage profit if you have 1 EUR in hand. (5 Marks) [TOTAL - 20 MARKS] END OF QUESTION ONE QUESTION TWO