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

question 19

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's expectations are correct, then she could profit in the forward market by ________ and then ________.

• A)buying yen for ¥128.00/$; selling yen at ¥128.53/$
• B)buying yen for ¥128.53/$; selling yen at ¥128.00/$
• C)There is not enough information to answer this question
• D)She could not profit in the forward market.

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Definitions:

Rounded

The process of adjusting numbers to a specified degree of precision, often to make them simpler or more easily interpreted.

Mean

The mean of a collection of numbers, determined by summing up all the numbers and then dividing by the total number of numbers.

Median

The middle value in a list of numbers sorted in ascending or descending order, effectively separating the higher half from the lower half.

Quotient

The result obtained from dividing one number by another.