Assume the Following Bid and Ask Rates of the Pound

question 32

Multiple Choice

Assume the following bid and ask rates of the pound for two banks as shown below: As locational arbitrage occurs:

• A) the bid rate for pounds at Bank A will increase; the ask rate for pounds at Bank B will increase.
• B) the bid rate for pounds at Bank A will increase; the ask rate for pounds at Bank B will decrease.
• C) the bid rate for pounds at Bank A will decrease; the ask rate for pounds at Bank B will decrease.
• D) the bid rate for pounds at Bank A will decrease; the ask rate for pounds at Bank B will increase.

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Definitions:

Linear Regression Equation

An equation used to predict a dependent variable based on one or more independent variables, representing the line of best fit.

Y-Intercept

The point at which a line crosses the y-axis on a graph.

X-Intercept

The point at which a line or curve on a graph crosses the x-axis, indicating a value of x where the function equals zero.

Slope

The slope refers to the steepness or incline of a line on a graph, representing the rate of change between variables.