Which of the Following Is the Least Feasible Strategy for a Speculator

question 47

Multiple Choice

Which of the following is the least feasible strategy for a speculator who expects the Australian dollar to depreciate?

• A)sell Australian dollars forward and then purchase them in the spot market just before fulfilling the forward obligation
• B)sell futures contracts on Australian dollar; purchase Australian dollars in the spot market just before fulfilling the futures obligation
• C)purchase put options on Australian dollars, at some point before the expiration date, when the spot rate is less than the exercise price, purchase Australian dollars in the spot market and then exercise the put option
• D)purchase call options on Australian dollars; at some point before the expiration date, exercise the call option and then sell the Australian dollars received in the spot market
• E)All of the above are possible strategies for a speculator who expects the Australian dollar to depreciate.

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Definitions:

Price Elasticity

An indicator of the extent to which the demand for a product varies following a price adjustment.

Total Revenue

The total amount of money generated from the sale of goods or services before any costs are subtracted.

Climate Change

The man-made change in Earth’s climate from the accumulation of greenhouse gases caused by the use of fossil fuels.

Price Elasticity

A way to gauge how fluctuations in price affect a good's market demand.