Describe a Scenario That Will Make the Current Three-Months Forward

question 24

Essay

Describe a scenario that will make the current three-months forward rate on a foreign currency equal to the expected spot rate in three months for that currency. What might prevent this result from occurring?

---

Definitions:

Corporation

A legal entity that is separate and distinct from its owners, which can own property, incur debt, sue and be sued.

Partnership

A business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a partnership agreement.

Personal Liability

The legal responsibility of an individual to settle debts or obligations from their own assets, rather than those protected by a corporation or limited liability entity.

Business Debts

Obligations that a business incurs as a result of operating activities, including loans, accounts payable, and any other form of borrowed money.