Assume that the yen/dollar exchange rate quoted in Tokyo at 5 p.m. is ¥120 = $1, and the New York yen/dollar exchange rate at the same time (noon New York time) is ¥123 = $1. What action should a broker take to yield immediate profit?

Question

Quizplus · Accepted Answer

The broker should engage in arbitrage by buying yen in Tokyo at the lower rate (¥120 = $1) and selling it in New York at the higher rate (¥123 = $1) to make an immediate profit.

Assume That the Yen/dollar Exchange Rate Quoted in Tokyo at 5