Question: Suppose the pound sterling is bid at $1.9422 in New York and the euro is offered at $1.4925 in Frankfurt. At the same time,

Suppose the pound sterling is bid at $1.9422 in New York and

Suppose the pound sterling is bid at $1.9422 in New York and the euro is offered at $1.4925 in Frankfurt. At the same time, London banks are offering pounds sterling at 1.2998. b. Identify any arbitrage opportunities that may exist given the three above quotes. Carefully explain your answer and use a graph explaining all the transactions. If you were able to identify an arbitrage opportunity in a. explain the forces that would take place to eliminate the arbitrage opportunity identified. In your explanation give the quotes that would prevail in equilibrium. a.

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