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You observe the following quotes for the pound()and the New Zealand dollar (NZ$): Bid Ask $1.61/ $1.62/ $0.55/NZ$ $0.56/NZ$ What is the implied NZ$/ cross-quote?

You observe the following quotes for the pound()and the New Zealand dollar (NZ$):

Bid Ask
$1.61/ $1.62/
$0.55/NZ$ $0.56/NZ$

What is the implied NZ$/ cross-quote?

If the actual NZ$/ is: 2.95 2.96, is arbitrage possible?

If yes to above, what is the profit from triangular arbitrage if you have $1,000,000?

Please explain as explicit as possible these questions in 4 below points ( no actual answers needed, just want to understand how to do that):

1. Calculate implied rate using cross quote formula.

2. Compare that implied rate to actual rate.

3. Identify whether actual Bid rate or actual Ask rate will be utilized.

4. Finalize which country you will be in to use that rate.

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