Assume the Following Bid and Ask Rates of the Pound

question 22

Multiple Choice

Assume the following bid and ask rates of the pound for two banks as shown below: ​
Bid
Ask
Bank C
$1) 61
$1) 63
Bank D
$1) 58
$1) 60
​
As locational arbitrage occurs:

• A) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will increase.
• B) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will decrease.
• C) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will decrease.
• D) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will increase.

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