Peter Discovered an Arbitrage Opportunity Based on the Following Exchange

question 199

Multiple Choice

Peter discovered an arbitrage opportunity based on the following exchange rates:[LINE]$1US = EUR 1.1257[LINE]$1US = £.6928[LINE]1£ = EUR 1.65[LINE]If you start with $1, how much of a profit can you
Earn in U.S. dollars by exchanging currencies given these rates?

• A) $.013
• B) $.015
• C) $.019
• D) $.021
• E) $.023

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Definitions:

Gross Domestic Product (GDP)

The complete value, in monetary or market terms, of all the goods and services that are finalized within the territorial boundaries of a country within a particular period.

Investment

Allocating financial assets in hopes of achieving a return or profit.

Inventory

The raw materials, work-in-progress products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Gross Domestic Product (GDP)

A measure of the total economic production of a country, representing the total value of all goods and services produced over a specific time period.