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Use the following information to answer the next two questions. Suppose you see the following quotes for pounds at three banks. Bank X:$1.255-65 Bank Y:$1.245-59

  1. Use the following information to answer the next two questions.

    Suppose you see the following quotes for pounds at three banks.

    Bank X:$1.255-65

    Bank Y:$1.245-59

    Bank Z:$1.258-61

    Find the locational arbitrage profit available to someone with access to $1,000,000

    9638.55

    0

    1593.63

    3182.18

6.25 points

QUESTION 4

  1. The ask quote at Bank Y must increase to prevent the arbitrage opportunity found in the previous question.

    True

    False

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