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Assume that the exchange markets are not interfered by governments, that is, that the...

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samckinnon91 | eNotes Newbie

Posted April 19, 2013 at 6:21 PM via web

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Assume that the exchange markets are not interfered by governments, that is, that the rates are fully flexible. Further assume that the UK pound costs $1.70. 

 suppose $1.69 = 1 pound in New York, and $1.71 = 1 pound in London. explain how foreign-exchange arbitrage results in the same dollar/pound exchange in New York and London 

 

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