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The exchange rate of the Euro and the US Dollar against the British Pound are: Euro/British Pound=1.1206/1 US Dollar/British Pound=$1.2296/1 (a) What is the cross

The exchange rate of the Euro and the US Dollar against the British Pound are:

Euro/British Pound=1.1206/1

US Dollar/British Pound=$1.2296/1

(a) What is the cross rate in terms of Euro per US Dollar?

(b) Suppose the actual exchange rate is 0.8 Euro = 1 US Dollar. If you have 1,000 US Dollar, explain how to get the arbitrage profit by taking advantage of the mispricing?

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