Question
Suppose that the USD is pegged to gold at $10 per ounce and the euro is pegged to gold at 8 per ounce. If
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. $120. $40. $125. $104.17. 120. $41.67. $108.
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International Financial Management
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