1. Suppose the euro is quoted at 0.6064-80 in London and the pound sterling is quoted at 1.6244-59 in Frankfurt.
a. Is there a profitable arbitrage situation? Describe it.
b. Compute the percentage bid-ask spreads on the pound and euro.
2. As a foreign exchange trader at Sumitomo Bank, you have a customer who would like spot and 30-day forward yen quotes on Australian dollars. Current market rates are
a. What bid and ask yen cross rates would you quote on spot Australian dollars?
b. What outright yen cross rates would you quote on 30- day forward Australian dollars?
c. What is the forward premium or discount on buying 30-day Australian dollars against yen delivery?