Assume That the Yen/dollar Exchange Rate Quoted in London at 3

question 18

Multiple Choice

Assume that the yen/dollar exchange rate quoted in London at 3 p.m.is $\times$ 120 = $1,and that the New York yen/dollar exchange rate at the same time is $\times$ 123 = $1.Which profit making situation exists here?

• A)Option
• B)Straddle
• C)Swap
• D)Arbitrage

Distinguish between different problem types based on the clarity of the existing and desired states.

Understand the various stages of the rational decision-making process and challenges at each stage.

Appreciate the importance of framing and presentation in decision-making.

Explain the role of shortcuts and assumptions in improving decision-making efficiency while recognizing their potential pitfalls.

---

Definitions:

Variable Costs

Expenses that vary directly with levels of production.

Fixed Costs

Fixed costs refer to the expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Normal Rates

The usual or average rates for something within a particular context, such as interest rates or growth rates.

Above Normal

Refers to performance, conditions, or results that exceed the usual or expected standard.