If CIBC posts 1.10 CA$/US$ - 1.14 CA$/US$ bid-ask exchange rates,Scotiabank posts 1.12 CA$/US$ - 1.15 CA$/US$ bid-ask exchange rates,and RBC posts 1.13 CA$/US$-1.16 CA$/US$ bid-ask exchange rates,which of the following statements is correct:

Question

Quizplus · Accepted Answer

Arbitrage involves taking advantage of price differences between markets to make a profit. In this scenario, the best rate for buying US$ with CA$ is 1.10 at CIBC, and the best rate for selling US$ for CA$ is 1.16 at RBC. However, this does not create an arbitrage opportunity because you would be buying US dollars at a lower rate and selling at a higher rate without a direct opportunity to profit from a reverse transaction due to the overlapping bid-ask spreads.

If CIBC Posts 1