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Cross-Rates and Arbitrage [LO1] Suppose the Japanese yen exchange rate is Y80 = $1, and the British pound exchange rate is 1 = $1.58. a.

Cross-Rates and Arbitrage [LO1] Suppose the Japanese yen exchange rate is Y80 = $1, and the British pound exchange rate is 1 = $1.58. a. What is the cross-rate in terms of yen per Pound? b. Suppose the cross-rate is Y129= 1. Is there an arbitrage opportunity here? If there is, explain how to take advantage of the mispricing and the potential arbitrage profit.

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