Discussion Reply
The difference in currency value among different countries creates an opportunity for banks, companies, and individuals to buy and sell currency and gain a profit. The market where currency is exchanged is called the foreign exchange market. The parity in money values also creates an opportunity for individuals to buy goods in a different country where the goods become even cheaper because of the exchange rate. I, therefore, agree with Steve's sentiments that it is possible to buy a car in the international market if it is cheaper and the exchange rate is favorable. If the car is being imported for sale then the process is called arbitrage.
Arbitrage can happen when an investor can make monetary gain from simultaneously buying and selling a commodity in two different markets. The aspect of simultaneousness is very important in arbitrage. Other aspects like perfect information on the transaction, low transaction costs in asset purchase and the exchange currency matter in the arbitrage business. However, I also agree with Steve's sentiments on the fact that buying a car abroad is not simultaneous as it would attract other costs in purchasing the car as well as in exchange currency. Factors involved in importing the vehicle are also uncertain because while in the local country, an investor may not know what might happen in the international market. It is, therefore, easier to invest or buy a car in the local market compared to the hustle of buying it in the international market. Arbitrage requires fast or instantaneous purchasing and selling. If the car was bought abroad and sold to a buyer abroad immediately then the business would have been viable.
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