Question

Kendall Wood Products Corp. purchased securities on the London Stock Exchange and then immediately resold them on the New York Stock Exchange at a higher price. The profits from this transaction were used to buy new machinery for the mill. This company engaged in

Answer 1

Answer:

Arbitrage.

Explanation:

Arbitrage is the act of taking advantage of a price imbalance between two or more different markets: striking a blend of identical deals that exploits on the difference, the difference among the various market prices at which the unit or product is traded will be the profit ratio.

For instance, a stock trader may purchase a stock on a foreign exchange where the price of the commodity rate has not yet adjusted for the frequent fluctuating exchange rate. The value of the stock on the foreign exchange is consequently undervalued compared to the price of the stock on the local exchange and the stock trader can rake in profit from this difference.