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

question 35

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 her potential gain is ________ and her potential loss is ________.

• A)$100,000; unlimited
• B)unlimited; unlimited
• C)$100,000; $100,000
• D)unlimited; $100,000

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Definitions:

Marginal Revenue

The revenue that a company gains by selling an additional unit of a product, indicating the income effect of increasing output by one unit.

Marginal Cost

The additional financial burden of creating another unit of a product or service.

Price Elasticity

The extent to which consumer demand for a good changes in response to a change in the good's price, represented by the ratio of percentage change in demand to percentage change in price.

Product Differentiation

The process by which companies distinguish their products from those of competitors, through design, features, branding, quality, or other attributes.