A Trader at a U

question 53

Multiple Choice

A trader at a U.S.bank believes that the euro will strengthen substantially in exchange rate value during the next hour.Thus,she buys large amount of euro now and wait for the value of the euro to rise so that she can sell it later.This action is called:

• A) arbitrage, because it is a risk-free activity.
• B) arbitrage, because it is a risky activity.
• C) speculation, because it is a risk-free activity.
• D) speculation, because it is a risky activity.

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Definitions:

Indirect

Costs that cannot be directly traced to a specific product or service, such as overhead expenses in manufacturing.

Indirect Material

Materials used in the production process that are not directly identifiable with specific products or jobs, such as lubricants and cleaning supplies.

Direct

involves straight or firsthand transmission or provision of goods, services, or communication without the involvement of an intermediary.

Materials Traceable

Direct materials that can be directly identified and assigned to the manufacturing process of a specific product.