On Commodity Exchange a It Is Possible to Buy and Sell

question 13

Multiple Choice

On Commodity Exchange A it is possible to buy and sell crude oil at $117 per barrel,while on Commodity Exchange B crude oil can be bought and sold at $118 per barrel.If there are transaction costs of 1% when buying or selling on either exchange,what is the net effect of buying a barrel of oil on Exchange A and selling it on Exchange B?

• A)-$1.35
• B)-$0.17
• C)$0.99
• D)$1.01
• E)$1.00

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Definitions:

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