Solved

If a Bottle of Fine French Wine Costs US$250 in the U.S

Question 31

Multiple Choice

If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are no transaction costs, and the exchange rate is 10 rand/US$, then


A) there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in South Africa will drop.
B) there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in the U.S. will drop.
C) there is no arbitrage opportunity.
D) Unable to determine, since France is in the eurozone and we would need exchange rates in euro terms.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents