The Spot Rate Between the U

question 125

Multiple Choice

The spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.6607. If the interest rate in the United States is 6 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

• A) $0.5368 per NZD
• B) $0.6051 per NZD
• C) $0.7614 per NZD
• D) $0.8075 per NZD

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Definitions:

Market

A place or system where buyers and sellers interact to exchange goods, services, or information.

Consumer Surplus

Consumer Surplus is the difference between the highest price a consumer is willing to pay for a good or service and the actual price they pay.

Tax

A mandatory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Reduction

The act of making something smaller or less in amount, degree, or size.