Kizspy | Question: 13
(Choose 1 answer)
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 =
€1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of
£1.00
€1.25 how can you make money?
A. No arbitrage is possible.
B. Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£.
C. Buy £ $2/£, buy € at €1.25/£, sell € at $1.50/€.
D. None of the above.
