The Exchange Rates in New York Are ¥1000 = $9

question 1

Multiple Choice

The exchange rates in New York are ¥1000 = $9 and the exchange rates in Tokyo are ¥171 = $1.5.You incur a transaction fee of 0.1% when buying and selling in each market.You have $1 million dollars with which to purchase foreign currency.What is your maximum potential profit from exploiting the arbitrage opportunity?

• A)$0
• B)$0.024 million
• C)$0.026 million
• D)-$0.024 million
• E)-$0.026 million

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle, whichever is longer.

Accounts Receivable

Funds that customers owe to a business for products or services already provided but not yet compensated for.

Current Ratio

A financial metric that indicates a company's ability to meet short-term liabilities with its short-term assets.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year with its current assets.