A Large Restaurant Contracts with a Local Laundry to Wash

question 72

Multiple Choice

A large restaurant contracts with a local laundry to wash white napkins. The laundry returns the napkins in bundles of 100 napkins. The restaurant randomly samples 10 napkins from each bundle to make sure that the napkins are clean with no stains or other defects. By sampling only 10 of the napkins,the restaurant may conclude that all of the napkins are clean and use the bundle,even when the napkins are actually dirty and should not be used. This sampling risk is called ________.

• A)producer's risk
• B)uncertainty
• C)consumer's risk
• D)inspection risk

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Definitions:

Spot Trade

A transaction that involves the immediate exchange of financial instruments or commodities.

Rupees

The official currency of India, symbolized as INR and used also in other South Asian countries.

International Fisher Effect

A theory proposing that the difference in nominal interest rates between two countries is equal to the expected change in their exchange rates.

Foreign Currency Approach

A method in financial analysis or accounting that deals with the effects of exchange rates on foreign currency transactions and translations.