Assume the following bid and ask rates of the pound for two banks as shown below:
Bid
Ask
Bank C
$1)61
$1)63
Bank D
$1)58
$1)60

As locational arbitrage occurs:
A) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will increase.
B) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will decrease.
C) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will decrease.
D) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will increase.

Question

Assume the following bid and ask rates of the pound for two banks as shown below: ​
Bid
Ask
Bank C
$1)61
$1)63
Bank D
$1)58
$1)60
​
As locational arbitrage occurs:
A) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will increase.
B) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will decrease.
C) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will decrease.
D) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will increase.

Quizplus · Accepted Answer

The Answer of Assume the following bid and ask rates of the pound for two banks as shown below: ​
Bid
Ask
Bank C
$1)61
$1)63
Bank D
$1)58
$1)60
​
As locational arbitrage occurs:
A) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will increase.
B) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will decrease.
C) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will decrease.
D) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will increase.

Assume the Following Bid and Ask Rates of the Pound