Which of the Following Is an Example of 'Arbitrage

question 57

Multiple Choice

Which of the following is an example of 'arbitrage'?

• A)An investor, seeing that the price of palladium on the metals exchange in two different countries is slightly different, buys on one and sells on the other to make a profit.
• B)An inventor of a new hydrocarbon cracking technology based on palladium buys this metal knowing that its price will rise when the technology is adopted.
• C)A firm buys $250 000 of palladium today, with an option to sell it at $275 000 in one year if interest rates rise above 10%.
• D)A metals merchant is offered $108 000 in one year for $100 000 of palladium today, when the interest rate is 10%.

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Definitions:

Scientific Management

A theory of management that analyzes and synthesizes workflows, aiming to improve economic efficiency, especially labor productivity, developed by Frederick W. Taylor.

Dehumanized

The process of depriving a person or group of positive human qualities, often leading to the perception of them as less than human.

Informal Networks

Unofficial relationships and channels of communication between individuals within an organization or community.

Hawthorne Studies

A series of influential research projects that examined the effects of the work environment on employee productivity, conducted in the 1920s and 1930s.