Question: Suppose the current bid and ask spot rate quotes are: $/: 1.2621 25 $/: 1.9135 41 What cross rate bid and ask quotes in terms

Suppose the current bid and ask spot rate quotes are:

$/: 1.2621 25

$/: 1.9135 41

What cross rate bid and ask quotes in terms of / do these prices suggest? (6 points) BONUS: Suppose a dealer provides cross-rate bid and ask quotes of /: 0.6650 70 Do these quotes suggest an arbitrage opportunity? If so, describe the strategy to exploit the opportunity and calculate the arbitrage profits. Start by borrowing 1,000 units in one currency and show that at the end of your trades you have more than you borrowed. (10 points)

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