Profits from speculation arise because of
A)the spread between the bid and ask prices on bonds.
B)the illiquidity of markets for derivative instruments.
C)the high information costs in markets for derivative instruments.
D)disagreements among traders about future prices of a commodity or financial instrument.

Question

Quizplus · Accepted Answer

Profits from speculation arise due to disagreements among traders about future prices of a commodity or financial instrument. This creates opportunities for traders to buy low and sell high, thereby earning profits from their speculation. A, B, and C do not correctly explain the reason for profits from speculation. The bid and ask prices on bonds do not necessarily create profits from speculation, illiquidity and high information costs may impede speculation, but they do not necessarily lead to profits.

Profits from Speculation Arise Because of