The 90-Day Forward Rate for the Euro Is $1

question 74

Multiple Choice

The 90-day forward rate for the euro is $1.07, while the current spot rate of the euro is $1.05. What is the annualized forward premium or discount of the euro?

• A) 1.9 percent discount
• B) 1.9 percent premium
• C) 7.6 percent premium
• D) 7.6 percent discount

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Definitions:

Randomization

Controlling for the effects of extraneous variables by ensuring that the variables operate in a manner determined entirely by chance.

Experimental Control

Eliminating the influence of an extraneous variable on the outcome of an experiment by keeping the variable constant in the experimental and control groups.

Spurious Relationship

A false association between two variables that appears to be causally linked but is actually due to an extraneous variable.

Nonexperimental Method

Use of measurement of variables to determine whether variables are related to one another. Also called correlational method.