Consider the following spot exchange rates: $1.60/£, ¥105/$, €1.6/$, and L2,020/$. Which one of the following prices for 1 troy ounce of gold seems to violate the law of one price if gold sells for $290 per troy ounce in the United States?

Question

Quizplus · Accepted Answer

$290 × £1/$1.60 = £181.25$290 × ¥105/$1 = ¥30,450$290 × €1.6/$ = €464; €405 violates the law of one price.$290 × L2,020/$ = L585,800

Consider the Following Spot Exchange Rates: $1