If the exchange rate quoted in two different countries were out of line with eac
ID: 2721375 • Letter: I
Question
If the exchange rate quoted in two different countries were out of line with each other, an enterprise trader could make a profit by buying in the market where the currency was cheaper and simultaneously selling it in the market where the currency was more expensive. Such a person would be known as a A) spot trader B) arbitrageur C) cross trader D) capitalist If the exchange rate quoted in two different countries were out of line with each other, an enterprise trader could make a profit by buying in the market where the currency was cheaper and simultaneously selling it in the market where the currency was more expensive. Such a person would be known as a A) spot trader B) arbitrageur C) cross trader D) capitalist A) spot trader B) arbitrageur C) cross trader D) capitalistExplanation / Answer
An arbitrageur is a type of investor who attempts to profit from price inefficiencies in the market by making simultaneous trades that offset each other and capturing risk-free profits. An arbitrageur would, for example, seek out price discrepancies between Currencies and buy the cheaper currencies in one country while short selling the same amount of overvalued currencies on another country, thus capturing risk-free profits as the prices on the two countries converge.
Ans is B) Arbitrageur