Attempts

Keep the Highest $0/2$

Arbitrage and spot exchange rates

Suppose you trade dollars and euros for a bank that has branches in Los Angeles and Rome. You can electronically transfer the funds between the two

branch locations at no cost$,$ and trading commissions are negligible. The current dollar$-$per$-$euro exchange rate in Los Angeles is $E_{\frac{\text{\$}}{E}UR}^{LA}=1\mathrm{.}5886,$

while in Rome, it is $E_{\frac{\text{\$}}{E}UR}^{RO}=1\mathrm{.}6272.$

You can make a profit for the bank if you buy euros in

and sell them in

Assuming other foreign exchange traders face the same exchange rates you do$,$ they will buy dollars in

"and sell them

in

$.$ As a result, the dollar$-$per$-$euro exchange rate in Rome $(E_{\frac{\text{\$}}{E}UR}^{RO})$ will

$,$ and the dollar$-$per$-$euro exchange rate in Los

Angeles $(E_{\frac{\text{\$}}{E}UR}^{LA})$ will