Solving problems in economics and finance.

2. Suppose you have the following spot exchange rates in FX markets: 1 = $1.29, 1 = $1.17, and 1 = 1.13. i) Please check if the cross rate between the euro () and the UK pound () is consistent or not. ii) How much profit (in $ terms) can you make from trading $1,000? Describe your trading process to get your profit, if there is any. iii) How much will you have profit or loss when you follow a reversed order of transaction between UK pound and euro from that in Q2. ii) above? iv) How do you expect the current cross rate of 1 = 1.13 change after numerous arbitrage transactions in global FX markets take place, go up or down in the value of UK pound with respect to euro? Explain why and how