Question: Which following statement is INCORRECT? a) When the market is not in equilibrium, the potential for risk-less or arbitrage profit exits. b) The theories about

 Which following statement is INCORRECT? a) When the market is not

Which following statement is INCORRECT? a) When the market is not in equilibrium, the potential for "risk-less" or arbitrage profit exits. b) The theories about how exchange rate always work out to be "true when compared to what students and practitioners observe in the real world. c) A forward exchange agreement between currencies states the rate of exchange at which a foreign currency will be bought forward or sold forward at a specific date in the future d) RPPP holds that PPP is not particularly helpful in determining what the spot rate is today that the relative change in prices between two countries over a period of time determines change in the exchange rate over that period. 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 yen 129.87/$ and the 6-month forward rate is yen 128.53/$. Andrea thinks the yen will move to yen 128.00/$ in the next six months. Andrea should to profit from changing currency values. a) do nothing b) buy dollar c) sell yen d) sell dollar

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!