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1. Consider the following foreign exchange rates: 1 = 2 1 = $1.5 $1 = 1 i. Examine the opportunity for arbitrage profits if such
1. Consider the following foreign exchange rates: 1 = 2 1 = $1.5 $1 = 1 i. Examine the opportunity for arbitrage profits if such prices were observed. If there is an arbitrage opportunity, show how you can make profit from the given exchange rates. ii. If there is an arbitrage opportunity, will it last? Why? iii. What factors determine whether opportunities for arbitrage profits appear to remain in observed foreign exchange rates?
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