4. Arbitrage and spot exchange rates Suppose you trade dollars and euros for a bank that has branches in Los Angeles and Paris. You can electronically transfer the funds between the two branch locations at no cost, and trading commissions are negligible. The current dollarpereuro exchange rate in Los Angeles is Ewmm = 1.5561, while in Paris, it is gym?\" = 1.5353. You can make a prot for the bank if you buy euros in V and sell them in V . Assuming other foreign exchange traders face the same exchange rates you do, they will buy dollars in V and sell them in v . As a result, the dollarpereuro exchange rate in Paris (Egymp'd) will V , and the dollarpereuro exchange rate in Los Angeles (Egg-m\") will v