If you know that the price of a Canadian dollar in France is €2, then you also know that in Canada a British pound costs CAN$2.00, then under perfect triangular arbitrage the pound cost of a euro must be:

Question

Quizplus · Accepted Answer

To find the pound cost of a euro, we need to use the given exchange rates: €2 per Canadian dollar and CAN$2 per British pound. Under triangular arbitrage, the exchange rate should be consistent. Therefore, 1 euro should equal 1 British pound, which means the pound cost of a euro is €4.00.

If You Know That the Price of a Canadian Dollar