Which of the Following Is an Example of Arbitrage

question 38

Multiple Choice

Which of the following is an example of arbitrage?

• A) An inventor of a new hydrocarbon cracking technology based on palladium buys this metal knowing that its price will rise when the technology is adopted.
• B) A metals merchant is offered $108,000 in one year for $100,000 of palladium today, when the interest rate is 10%.
• C) An investor, seeing that the price of palladium on the metals exchange in two different countries is slightly different, buys on one and sells on the other to make a profit.
• D) A firm buys $250,000 of palladium today, with an option to sell it at $275,000 in one year if interest rates rise above 10%.

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Definitions:

Artisan Specialties

Unique crafts or products made by skilled craftspeople, often by hand or using traditional methods.

Big-Game Hunting

Big-game hunting involves the tracking and hunting of large animals, often for food, sport, or traditional cultural practices.

Microlith

Small, often pointed stone tools that were part of the toolkit in prehistoric times, used as spear points or arrowheads.

Blade

A thin, flat edge or surface used for cutting or shaping materials, found in tools such as knives, swords, and blades of grass.