Andrea Cujoli Is a Currency Speculator Who Enjoys "Betting" on Changes

question 37

Multiple Choice

Andrea Cujoli is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129.87/$ and the 6-month forward rate is ¥128.53/$. Andrea thinks the yen will move to ¥128.00/$ in the next six months. Andrea should ________ at ________ to profit from changing currency values.

• A)buy yen; at the forward rate
• B)buy dollars; at the forward rate
• C)sell yen; at the forward rate
• D)There is not enough information to answer this question.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials that fluctuate with production volume.

Room Nights

A measure in the hospitality industry, representing the total number of nights that guests have booked to stay in a hotel.

Break-Even Point

The point at which total revenues equal total costs, resulting in neither profit nor loss.