Assume That the Interest Rate in the Home Country of Currency

question 89

Multiple Choice

Assume that the interest rate in the home country of Currency X is much higher than the U.S. interest rate. According to interest rate parity, the forward rate of Currency X:

• A) should exhibit a discount
• B) should exhibit a premium
• C) should be zero (i.e., it should equal its spot rate)
• D) should exhibit a premium or should be zero (i.e., it should equal its spot rate)

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