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Assume That the Yen/dollar Exchange Rate Quoted in Tokyo at 3:00

question 21

Multiple Choice

Assume that the yen/dollar exchange rate quoted in Tokyo at 3:00 p.m. is ×120 = $1, and the yen/dollar exchange rate quoted in New York at the same time is ×123 = $1. A dealer in New York uses dollars to purchase yen and then immediately sells the yen to buy dollars in Tokyo, thereby making a profit. The dealer has engaged in a(n) _____.


Definitions:

Lemonade Stand

A small, informal business, often run by children, that sells lemonade or similar beverages, typically from a roadside stand.

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