2.1 Suppose that one euro can be exchanged for 1.2 U.S.

dollars and that one U.S. dollar can be exchange for 110 Japanese yen. If these currencies can be traded freely with low transaction costs, what exchange rate would you expect between euros and Japanese yen? Describe the transactions that would occur if the euro–yen exchange rate is higher than this amount (more yen per euro). (Hint: Is arbitrage relevant?)