The Action of Arbitrage Is

question 39

Multiple Choice

The action of arbitrage is

• A) the process of buying a currency cheap and selling it dear.
• B) the process of buying a currency dear and selling it cheap.
• C) the process of buying and selling currency at the same price.
• D) the process of selling currency at different prices in different markets.
• E) the process of buying a currency and holding onto it to take it off the market.

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Definitions:

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield on government securities such as Treasury bills.

Striking Price

The predetermined price at which the holder of an option contract can buy (call) or sell (put) the underlying asset.

Callable Bonds

Callable bonds are bonds that can be redeemed by the issuer prior to their maturity date at a specified call price.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.