Arbitrage can be defined as capitalizing on a discrepancy in quoted prices that does not involve risk but involves an investment of funds.

Question 1 options:

	a) True
	b) False

Question 2 (1 point)

For locational arbitrage to be possible, one bank's ask rate must be higher than another bank's bid rate for a currency.

Question 2 options:

	a) True
	b) False

Question 3 (1 point)

Technology enables more consistent prices among banks and reduces the likelihood of significant discrepancies in foreign exchange quotations among locations.

Question 3 options:

	a) True
	b) False

Question 4 (1 point)

Assume locational arbitrage is possible and involves two different banks. The realignment that would occur due to market forces would increase one bank's ask rate and would decrease the other bank's bid.

Question 4 options:

	a) True
	b) False

Question 5 (1 point)

Locational arbitrage explains why prices among banks at different locations will not normally differ by a significant amount.

Question 5 options:

	a) True
	b) False

Question 6 (1 point)

Triangular arbitrage is risk free in that there is no uncertainty about the prices at which currencies are bought and sold

Question 6 options:

	a) True
	b) False

Question 7 (1 point)

Because of triangular arbitrage, exchange rates are usually aligned correctly.

Question 7 options:

	a) True
	b) False