Triangular Arbitrage Does Not Cause the Cross Rate Between Two

question 44

True/False

Triangular arbitrage does not cause the cross rate between two foreign currencies to be consistent with the dollar exchange rates of these two currencies.

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Definitions:

Intermediate Product

Goods that are produced and used as inputs in the production of other goods, rather than being sold directly to consumers.

Processed Further

A decision in cost accounting regarding whether or not to continue adding value to a product beyond the split-off point.

Differential Revenue

The difference in revenue expected from two different business decisions or scenarios, often considered when evaluating options.

Variable Costs

Costs that vary in total dollar amount as the level of activity changes.