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Suppose you trade dollars and euros for a bank that has branches in Los Angeles and Paris. You can electronically transfer the funds between the

Suppose you trade dollars and euros for a bank that has branches in Los Angeles and Paris. You can electronically transfer the funds between the two branch locations at no cost, and trading commissions are negligible. The current dollar-per-euro exchange rate in Los Angeles is E$/EURLA=1.5728, while in Paris, it is E$/EURPA=1.6079. You can make a profit for the bank if you buy euros in __ and sell them in __. Assuming other foreign exchange traders face the same exchange rates you do, they will buy dollars in and sell them in __. As a result, the dollar-per-euro exchange rate in Paris (E$/EURPA ) will __, and the dollar-per-euro exchange rate in Los Angeles (E$/EURLA ) will __.

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