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question 47

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You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.20 how can you make money?


Definitions:

Indifference Curve

A graph representing different bundles of goods between which a consumer is indifferent, showing combinations that yield equal satisfaction or utility.

Apples And Bananas

A phrase indicating comparison or choice between two different items, often used to illustrate the concept of preference or trade-off in economics.

Utility Function

a mathematical representation in economics of a consumer's preference ranking over a set of goods or services.

Indifference Curve

A graphical representation showing combinations of goods or services among which a consumer is indifferent, signifying equal levels of utility.

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