1. A shirt that retails for $120 in New York sells for 60 in London. The exchange rate between the British pound and the dollar is

1 = $1.60. You spot a profit-making opportunity and choose to exploit it by buying and selling 5,000 shirts. (35 Points)

• Which country would you purchase the shirts in and for how much (in their currency)?
• Which country would you sell the shirts in and how much would you receive in their currency?

• Converting to dollars at 1 = $1.60, what is the amount of profit you would receive stated in terms of dollars?

2. Assuming the same information as in question 4- however, for your next purchase of 5,000 shirts, the dollar has strengthened against the pound by 25%.

What is the profit you will now make in terms of dollars?