Suppose that the pound is pegged to gold at 20 per ounce and the dollar is pegged to gold at $35 per ounce. This implies an exchange rate of $1.75 per pound. If the current market exchange rate is $1.80 per pound, how would you take advantage of this situation? Hint: assume that you have $350 available for investment.

Group of answer choices

both of the options

none of the options

Start with $350. Buy 10 ounces of gold with dollars at $35 per ounce. Convert the gold to 200 at 20 per ounce. Exchange the 200 for dollars at the current rate of $1.80 per pound to get $360.

Start with $350. Exchange the dollars for pounds at the current rate of $1.80 per pound. Buy gold with pounds at 20 per ounce. Convert the gold to dollars at $35 per ounce.