Question 3 (2.5 points) Suppose that the USD is pegged to gold at $10 per ounce and the euro is pegged to gold at 8 per ounce. If the current market exchange rate is $1.20 per euro, is there any arbitrage opportunity? If yes, how much can you make? Assume that you have $1,000 available for the investment. There is no arbitrage opportunity since the US and EU are pegged to gold. $102. $40. 120. $104.17. $120. $125. $41.67. $108.

Suppose that the USD is pegged to gold at $10 per ounce and the euro is pegged to gold at 8 per ounce. If the current market exchange rate is $1.20 per euro, is there any arbitrage opportunity? If yes, how much can you make? Assume that you have $1,000 available for the investment. There is no arbitrage opportunity since the US and EU are pegged to gold. $102. $40. 120. $104.17. $120. $125. $41.67. $108