Author Question: It the actual euro/dollar exchange rate on currency markets is 1.2/, and a kilogram of wheat still ... (Read 9 times)

rlane42 · **on:** Jul 7, 2018

It the actual euro/dollar exchange rate on currency markets is 1.2/, and a kilogram of wheat still costs 1 in the U.S. and 1.5 in France, Sam also knows that the price of a kilogram of wheat in France is ________.

A) 1.25
B) .80
C) .80
D) 1.2

Question 2

Sam's mentor is excited about the wheat prices in France and the U.S. because he sees an opportunity to buy wheat in the U.S. and sell it in France, which is known as a(n) ________.

A) exchange rate profit
B) arbitrage opportunity
C) violation of purchasing power parity
D) violation of the law of one price