Sell euros for 7080/€ in London. Use the pounds to buy euros for 6244/£ in Frankfurt. This is equivalent to buying pounds for 6156. There is a net profit of 0924 per pound bought and sold–a percentage yield of 13. 05% 0924 7080)

Suppose the euro is quoted at 0.7064-80 in London and the pound sterling is quoted at 1.6244-59 in Frankfurt.
a.) Is there a profitable arbitrage situation? Describe it.

Sell euros for £0.7080/€ in London. Use the pounds to buy euros for €1.6244/£ in Frankfurt.

This is equivalent to buying pounds for £0.6156. There is a net profit of £0.0924 per pound bought and sold–a percentage yield of 13.05% (0.0924/0.7080).
b.) Compute the percentage bid-ask spreads on the pound and euro
The percentage bid-ask spreads on the pound and euro are calculated as follows:
£ bid-ask spread = (1.6259 - 1.6244)/1.6259 = 0.09%
euro bid-ask spread = (0.7080 - 0.7064)/0.7080 = 0.23%