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 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:
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:
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