Question

Currency speculation takes place when

Multiple Choice

• the exchange rate at which a foreign exchange dealer will convert one currency differs on a particular day.

• the growth in a country's money supply exceeds the growth in its output, leading to price inflation.

• the purchase of securities in one market are immediately resold in another to profit from a price discrepancy.

• there is a simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

• there is short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

Answer 1

Correct Answer is Option D

Currency speculation takes place when

• there is short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

Option A is Incorrect as "Exchange Rate will always be different on different days as they always keep on fluctuating on a daily basis."

Option B is Incorrect because the practice of purchasing securities in one market and immediately reselling in another to profit from a price discrepancy is Arbitrage.

Option C is Incorrect because simultaneous purchase and sale of a given amount of foreign exchange for two different value dates is known as Hedging.