Question
Q1Beef I Suppose that beef sells for US$15 per kg in the USA and A$20 per kg in Australia. (a)Where would you buy beef if
Q1Beef I
Suppose that beef sells for US$15 per kg in the USA and A$20 per kg in Australia.
(a)Where would you buy beef if the exchange rate was A$1.2 per US$1, and where would you resell beef if you wanted to make a profit? (Assume there are no transport costs, trade barriers or taxes.)
(b)If a lot of people behaved like you and the exchange rate was fixed at A$1.2 per US$1, what would happen to the price of beef in the USA? In Australia? When would arbitrage cease to be profitable?
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Financial Accounting Making The Connection
Authors: J David Spiceland, Wayne Thomas, Don Herrmann
1st Edition
0077862260, 9780077862268
