The following exchange and interest rate quotations in 1998 were observed:

A) borrowing British pounds and lending U.S. dollars
B) borrowing U.S. dollars and lending Deutschmarks
C) borrowing Deutschmarks and lending British pounds
D) there are no arbitrage opportunities

Question

The following exchange and interest rate quotations in 1998 were observed:

A) borrowing British pounds and lending U.S. dollars 
B) borrowing U.S. dollars and lending Deutschmarks 
C) borrowing Deutschmarks and lending British pounds 
D) there are no arbitrage opportunities

Quizplus · Accepted Answer

$.4961 × 1.078125/1 .065 - $.4937 = $.0085

The Following Exchange and Interest Rate Quotations in 1998 Were