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Indicative of an absence of arbitrage

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a) i) The current spot rate between UK and USA is 0.80 GBP/USD and the current spot rate between France and USA is 0.90 EUR/USD. What should be the EUR/GBP exchange rate that would be indicative of an absence of arbitrage?

ii) If the actual rate observed in the market is 1.3 EUR/GBP, what would be your arbitrage profit if you had 10 GBP?

Reference no: EM132532011

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