Assume You Can Exchange $1 for Either £1 or €

question 79

Multiple Choice

Assume you can exchange $1 for either £1 or €.50 in the U.S.In the London market, you can exchange £1 for €.52.This situation creates an opportunity to profit immediately from which one of the following?

• A)Futures arbitrage
• B)Currency hedge
• C)Interest rate swap
• D)Absolute purchasing power parity
• E)Triangle arbitrage

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Definitions:

Variation

A change or difference in condition, amount, or level, typically with certain limits.

Decoupling

Refers to a process or condition where two or more connected entities operate independently or with reduced interdependence.

Conflict Management

The process of identifying and addressing differences that arise among individuals, groups, or organizations, aiming to resolve disagreements in a constructive manner.

Indirect Conflict Management

A strategy that addresses disputes by using intermediaries or indirect methods, rather than confronting parties directly.