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If a Kilogram of Coal Costs €1

Question 72

Multiple Choice

If a kilogram of coal costs €1.5 in Germany and $1 in the United States, the law of one price ________.


A) calculates the expected exchange rate between the euro and the dollar to be €1.5/$
B) calculates the expected exchange rate between the euro and the dollar to be €.67/$
C) tells us the expected exchange rate between the euro and dollar is equal to the actual rate
D) tells us there is an arbitrage opportunity

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