Assume That the Law of One Price Holds

Multiple Choice

Assume that the law of one price holds. A shirt that retails for $120 in New York sells for £60 in London. The exchange rate between the British pound and the dollar is £1 = $1.50. Assuming away transportation costs and trade barriers, this creates a profit-making opportunity called

A) currency swap.
B) arbitrage.
C) carry trade.
D) straddle.