Suppose That a Speculator Notes That the Current Three-Months Forward

question 10

Multiple Choice

Suppose that a speculator notes that the current three-months forward rate on the euro is $1.36 and the speculator expects that, in three months, the euro will have a value of $1.40. In this situation, the speculator would __________ euros on the forward market, and this activity __________ for the speculator.

• A) buy; involves risk
• B) buy; involves no possible risk
• C) sell; involves risk
• D) sell; involves no possible risk

---

Definitions:

Great Britain

An island in the North Atlantic Ocean off the northwest coast of continental Europe, comprising England, Scotland, and Wales.

Japan

An island country in East Asia, known for its rich history, cultural heritage, and significant economic and technological advancements.

Colony

A territory under the immediate political control of a state, distinct from the sovereign territory of that state.

Joint Chiefs of Staff

A body of senior uniformed leaders in the United States Department of Defense who advise the President, the Secretary of Defense, and the National Security Council on military matters.