Assume That the Forward Rate Is Used to Forecast the Spot

question 36

Multiple Choice

Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6 percent discount. Today's spot rate of the Canadian dollar is $.80. The spot rate forecasted for one year ahead is:

• A) $.860.
• B) $.848.
• C) $.740.
• D) $.752.
• E) None of these are correct.

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Definitions:

Liabilities

Financial obligations or debts owed by a business to outsiders, such as loans, accounts payable, or bonds.

Owner's Equity

The owner's residual interest in the assets of the business after deducting liabilities, representing ownership value in a company.

Owner's Equity

The residual interest in the assets of the enterprise after deducting its liabilities, also known as shareholder's equity.

Net Income

The final amount of money a company makes after taking away all expenses, including taxes and the costs of operation, from the total income.