If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are no transaction costs, and the exchange rate is 10 rand/US$, 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 the U.S., and selling it in South Africa and the price in the U.S. will drop.
C) there is no arbitrage opportunity.
D) Unable to determine, since France is in the eurozone and we would need exchange rates in euro terms.
C
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