Scenario: Sam Dearing, Budding International Financier
Sam Dearing is a summer intern in the arbitrage department at a prestigious Wall Street firm. Sam is hoping to be offered a full-time position at the firm after he graduates from college, and therefore, Sam knows that he must demonstrate a strong understanding of how exchange rates work.
-Sam's mentor is excited about the wheat prices in France and the U.S. because he sees an opportunity to buy wheat in the U.S. and sell it in France, which is known as a(n) ________.

Question

Quizplus · Accepted Answer

The opportunity to buy wheat in the U.S. and sell it in France is known as an arbitrage opportunity, where a trader can take advantage of a price differential between two markets to make a profit. This does not involve a violation of any economic laws or principles.