A trader at a U.S.bank believes that the euro will strengthen substantially in exchange rate value during the next hour.Thus,she buys large amount of euro now and wait for the value of the euro to rise so that she can sell it later.This action is called:

Question

Quizplus · Accepted Answer

The action described involves taking a position with the expectation of profiting from a future movement in exchange rates. This is the definition of speculation. Additionally, the activity is not risk-free, as the trader could be wrong in her prediction and the euro could actually decrease in value, leading to losses. Therefore, the correct choice is D, speculation, because it is a risky activity.

A Trader at a U