If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are no transaction costs, and the exchange rate is 20 rand/US$, then
A) there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in South Africa will drop.
B) there is an arbitrage opportunity by buying the wine in South Africa., and selling it in the U.S. and the price in the U.S. will drop.
C) here is an arbitrage opportunity by buying the wine in South Africa., and selling it in the U.S. and the price in the U.S. will rise.
D) there is no arbitrage opportunity.
B
You might also like to view...
The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than
What will be an ideal response?
Which of the following is not an example of price discrimination?
A. student discounts at museums B. mattress sales on Memorial Day C. rental car companies charging lower prices to local residents than to out-of-state residents D. children's discounts at amusement parks