If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are transaction costs of US$50, and the exchange rate is 20 rand/US$, then
A) there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in South Africa will drop.
B) there is an arbitrage opportunity by buying the wine in South Africa., and selling it in the U.S. and the price in the U.S. will drop.
C) here is an arbitrage opportunity by buying the wine in South Africa., and selling it in the U.S. and the price in the U.S. will rise.
D) there is no arbitrage opportunity.
B
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