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

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Definitions:

Innovation

The process of creating new ideas, products, or methods, often leading to significant progress or change.

Uncertainty

The lack of surety or predictability in events, conditions, or outcomes.

Market-Creating Innovations

Products or ideas that meet the needs of a group of potential consumers whose needs have not been met before.

Management's Decision

Decisions made by an organization's management, guiding the direction, operations, and administrative actions of the company.