Which of the Following Is an Example of Triangular Arbitrage

question 42

Multiple Choice

Which of the following is an example of triangular arbitrage initiation?

• A) Buying a currency at one bank's ask and selling at another bank's bid, which is higher than the former bank's ask.
• B) Buying Singapore dollars from a bank (quoted at $0.55) that has quoted the South African rand (ZAR)/Singapore dollar (S$) exchange rate at ZAR2.50 when the spot rate for the South African rand is $0.20.
• C) Buying Singapore dollars from a bank (quoted at $0.55) that has quoted the South African rand/Singapore dollar exchange rate at ZAR3.00 when the spot rate for the South African rand is $0.20.
• D) Converting funds to a foreign currency and investing the funds overseas.

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the additional value created beyond the opportunity cost.

Normal Profit

The lowest amount of profit a business must earn to stay relevant in its market by covering the costs of missed opportunities.

Marginal Cost

The cost increase brought about by the production of an extra unit of a product or service.

Pure Monopolist

A market situation where a single company is the sole producer and seller of a product or service, without any close substitutes.