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

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Definitions:

Moral Hazard

The risk that a party insulated from risk may behave differently than if they were fully exposed to the risk.

Market Efficiency

Market efficiency refers to the extent to which market prices reflect all available, relevant information, making it impossible to consistently achieve higher returns on investment without taking additional risk.

Fair Insurance Policy

A policy that is considered equitable, offering terms and conditions that are reasonable and just for both the insurer and the insured, without exploiting any party.

Premium

An amount paid for an insurance policy, reflecting the cost of obtaining insurance coverage.