Robben Inc. converts $1,000,000 into euros when the exchange rate is $1 = €0.75. After three months, the company converts this back into dollars when the exchange rate is $1 = €0.80. Which of the following is the outcome of this transaction?

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Currency speculation typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates. In the first transaction, the company receives €750,000. These euros when converted back into dollars yield only $937,500 (€750,000 ÷ 0.80). Net loss = $1,000,000 - $937,500.