Which of the Following Best Describes Arbitrage

question 33

Multiple Choice

Which of the following best describes arbitrage?

• A)using foreign exchange to fund new foreign direct investments
• B)purchasing foreign currency in anticipation of long-term trends
• C)using foreign-exchange instruments to speculate for profit
• D)purchasing foreign currency on one market for immediate resale on another market

---

Definitions:

Equity Method

An accounting technique used to record investments in other companies when the investor has significant influence over the company.

Acquisition Cost

The total cost incurred to acquire an asset, including the purchase price and all related expenses.

Equity Method

An accounting technique used to record investments in other companies, where the investment is reflected as an asset and changes in the value of the investment adjust the investor's income.

Realized Gains

Profits that are recognized when assets are sold for a price higher than their book value.