Andrea Cujoli Is a Currency Speculator Who Enjoys "Betting" on Changes

question 26

Multiple Choice

Andrea Cujoli is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129.87/$ and the 6-month forward rate is ¥128.53/$. Andrea thinks the yen will move to ¥128.00/$ in the next six months. If Andrea buys $100,000 worth of yen at today's spot price and sells within the next six months at ¥128/$ she will earn a profit of ________.

• A)$146.09
• B)$101,460.94
• C)$1460.94
• D)nothing; she will lose money

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Definitions:

Consolidated Statement

A financial statement that aggregates the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries to reflect the total financial position and results of the group.

Financial Position

An entity's economic state, represented by its assets, liabilities, and equity at a given point in time.

Acquisition Differential

The gap between what is paid for an acquisition and the fair value of the clearly identified assets acquired.

Impairment Losses

Financial recognition of the reduced recoverable value of an asset, below its carrying amount on the balance sheet.