Multiple Choice
Tom is looking at the morning's currency reports and notices that 1 Nigindia rupee equals 1.5 Vietbodian pounds. It also reads that 1 Vietbodian pound equals 2 Mexicali pesos, but 1 Nigindia rupee equals 4 Mexicali pesos. Tom wants to gain profits by employing an arbitrage strategy. Which of the following defines arbitrage strategy?
A) An arbitrage strategy is a risky strategy to buy something at a low price and sell it at a high price.
B) An arbitrage strategy is a pattern of trade that allows the exchange in currencies.
C) An arbitrage strategy is a pattern of trade that exploits the discrepancies between the prices of different assets in order to earn profit without bearing any risk.
D) An arbitrage strategy is a strategy that requires risky behaviors and a high setup cost.
Correct Answer:
Verified
Correct Answer:
Verified
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