The Spot Rate Is $1

question 37

Multiple Choice

The spot rate is $1.00/€ and the one-year forward rate is $1.10/€. What is the percentage forward premium (or discount) on the dollar?

• A) less than 0%
• B) 0%
• C) 10 percent
• D) more than 10%
• E) None of the above

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Definitions:

Filter

A device or process that removes unwanted parts from a substance or signal.

Negotiate Costlessly

The theoretical scenario wherein parties can reach agreements without incurring any transaction or communication costs.

Social Discount Rate

A rate used in cost-benefit analysis to account for the time value of public projects' benefits and costs, reflecting society's preference for immediate benefits over future ones.

Stock Dissipation Rate

The rate at which the amount of a particular stock or resource is reduced through use or consumption.