Molsons Beer is produced in Canada and sold in many countries. In the province of Ontario a six-pack of Molsons beer sold for 8.75 Canadian in 2000. Across the border in Michigan, a six pack of the same beer was for sale for 5.19 U.S. At the time, the exchange rate was 0.67 U.S. = 1.00 Canadian.
1. How much would it cost in U.S. currency to buy the beer in Ontario?
2. How much would it cost in Canadian currency to buy the beer in Michigan?
3. Is there an arbitrage opportunity? If so, how much profit could you expect on a six-pack?