Assume the Bid Rate of an Australian Dollar Is £0

question 13

Multiple Choice

Assume the bid rate of an Australian dollar is £0.40 while the ask rate is £0.42 at Bank Q. Assume the bid rate of an Australian dollar is £0.415 while the ask rate is £0.419 at Bank V. Given this information, what would be your gain if you use £1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the £1,000,000 you started with?

• A) £10,003
• B) £12,063
• C) £14,441
• D) £0
• E) £18,219

Gain insights into the process of marking to market and the role of the clearinghouse.

Understand the impact of futures markets on spot markets and vice versa.

Understand the taxation and accounting for futures trading gains and losses.

Distinguish between contango and backwardation in futures markets.

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Definitions:

Objective of Accounting

The main purpose of accounting, which is to record financial transactions, summarize and report financial information accurately for decision making.

Decision Making

The cognitive process of selecting a course of action from multiple alternatives to achieve a desired goal.

Account Numbers

Unique identifiers assigned to individual accounts within a financial management system or bank.

Account Type

Categories within accounting systems that classify financial transactions, such as assets, liabilities, revenue, and expenses.