You Are a U

question 25

Multiple Choice

You are a U.S.-based treasurer with $1,000,000 to invest.The dollar-euro exchange rate is quoted as $1.20 = €1.00 and the dollar-pound exchange rate is quoted at $1.80 = £1.00.If a bank quotes you a cross rate of £1.00 = €1.50,how much money can an astute trader make?

• A)No arbitrage is possible
• B)$1,160,000
• C)$500,000
• D)$250,000

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Definitions:

X-Inefficiency

An economic concept that captures inefficiencies in a firm's operations due to factors such as a lack of competitive pressure.

Principal-Agent Problems

Issues that arise when a principal hires an agent to perform tasks, and the agent's self-interest does not align with the principal's, leading to potential conflicts.

Social Regulation

Government-imposed rules and regulations designed to protect public health, safety, and well-being, affecting how businesses can operate.

Equal Employment Opportunity Commission

A federal agency in the United States charged with enforcing laws against workplace discrimination.