1. Given the following two sets of quotations by two currency dealers:

Dealer A Dealer B

Bid Ask Bid Ask

$1.1360/ $1.1590/ $1.1090/ $1.1220/

1. Show without any calculations 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.
2. Prove your point by narrating the trading activities that you need to perform and calculating arbitrage profit by starting with a nominal sum of $38 million.

2. Given the following three currency quotes given by a Tokyo bank and a London bank:

112.14/$

141.92/

0.7862/$

Please answer parts (a) and (b) in the order they are given.

1. Show whether there is an arbitrage opportunity implied in these three quotes.
2. Starting with a nominal $32 million, show how much arbitrage profit (if any) you can make by trading the currencies at the given rates.