Question
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.20 = 1.00 and the dollar-pound exchange rate is
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.20 = 1.00 and the dollar-pound exchange rate is quoted at $1.80 = 1.00. If a bank quotes you a cross rate of 1.00 = 1.50, how much money can an astute trader make?
A) No arbitrage is possible
B) $1,160,000
C) $500,000
D) $250,000
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Survey of Economics
Authors: Irvin B. Tucker
8th edition
1111989664, 978-1133713357, 1133713351, 978-1111989668
