Business, 07.10.2019 21:30 zanaplen27

Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 per ounce. this implies an exchange rate of $1.75 per pound. if the current market exchange rate is $1.60 per pound, how would you take advantage of this situation? hint: assume that you have $350 available for investment. a. start with $350. buy 10 ounces of gold with dollars at $35 per ounce. convert the gold to £200 at £20 per ounce. exchange the £200 for dollars at the current rate of $1.80 per pound to get $360. b. start with $350. exchange the dollars for pounds at the current rate of $1.60 per pound. buy gold with pounds at £20 per ounce. convert the gold to dollars at $35 per ounce. c. a) and b) both work d. none of the above

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Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 pe...

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