Suppose the pound $()$ is pegged to gold at six pounds $(6)$ per ounce, whereas one ounce of

gold is worth $12$ francs $(F).$

$6=1$ oz$.$ gold.

$F12=1$ oz$.$ gold.

what is the exchange of fransaces per pound?

$($multiple choice$)$ For a country under the classical gold standard, in order to increase the money

supply of the local currency, this country must

a$.$ adopt flexible exchange rate and sell gold to other countries.

b$.$ adopt flexible exchange rate and buy gold from the other countries

c$.$ adopt the fixed exchange rate and buy gold from the other countries

d$.$ adopt the fixed exchange rate and sell gold to the other countries

$3,$ International Bimetallism

$1875,$ In Sweden, Scandinavian Monetary Union: Rigsdaler specie of $25\mathrm{.}28g$ silver,

converted to $4$ krone $($or krona$)$ of $\frac{4}{2\mathrm{.}48}=1\mathrm{.}6129g$ gold; ratio $15\mathrm{.}67$

$1875,$ Netherlands: the Dutch Guilder from $9\mathrm{.}45g$ silver to $0\mathrm{.}6048g$ gold; ratio $15\mathrm{.}62$

How do you arbitrage in between two currencies and two metals? $($Feel free to find data

outside the textbook if you feel it is necessary$).$

Given the following information, what are the currency against currency bid$-$ask quotations?

Doug Bernard specializes in cross$-$rate arbitrage. He notices the following quotes:

SFR$1\mathrm{.}5971/$$

$A$$$\frac{1\mathrm{.}8215}{\text{\$}}$

A $$\frac{1\mathrm{.}1440}{?}$ SFR

Ignoring transaction costs, does Doug Bernard have an arbitrage opportunity based on these

quotes? If there is an arbitrage opportunity, what steps would he take to make an arbitrage profit,

and how would he profit if he has $$1,000,000$ available for this purpose.