A Trader Makes Profit by Buying a Currency at a Low

question 48

Multiple Choice

A trader makes profit by buying a currency at a low price in one market and immediately selling it in another market.This activity is called:

• A) Speculation
• B) Arbitrage
• C) Hedging
• D) Squaring off

Recognize the concept of profitability index and its relation to NPV.

Apply the concept of average accounting return (AAR) and its significance in project evaluation.

Learn the impact of cash flows, discount rates, and other variables on the valuation of projects.

Evaluate projects using different capital budgeting techniques to understand their viability and impact on shareholder wealth.

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Definitions:

Selective Attention

Deployment of attention to only a chosen subset of the information available for processing in a situation. Selective attention to information that must be remembered later can be used as a memorization strategy.

Working Memory

A cognitive system responsible for temporarily holding information available for processing tasks such as reasoning and comprehension.

Long-term Memory

A type of memory capable of storing an unlimited amount of information for periods ranging from several minutes to a lifetime.

Limited Capacity

The theory that suggests human cognitive processing power is finite and can only handle a limited amount of information at one time.