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Question 3 (20 points) Suppose the Swiss Franc is currently traded at CHF 0.85/$. The British Pound is traded at GBP 0.77/$. Ignoring transaction costs:

Question 3 (20 points)

Suppose the Swiss Franc is currently traded at CHF 0.85/$. The British Pound is traded at GBP 0.77/$. Ignoring transaction costs:

Determine the CHF/GBP exchange rate consistent with these direct quotations.
Suppose the CHF/GBP cross rate in the market was at CHF 1.04/GBP. Is there any arbitrage opportunity?

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