Assume That a Currency's Spot and Future Prices Are the Same

question 60

Multiple Choice

Assume that a currency's spot and future prices are the same, and the currency's interest rate is higher than the UK rate. The actions of UK investors to lock in this higher foreign return would ____ the currency's spot rate and ____ the currency's futures price.

• A) put upward pressure on; put upward pressure on
• B) put downward pressure on; put upward pressure on
• C) put upward pressure on; put downward pressure on
• D) put downward pressure on; put downward pressure on

---

Definitions:

Traceable Fixed Expense

Fixed costs that can be directly linked to a specific segment of the business, and would disappear if the segment did.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remains constant regardless of the level of production.

Variable Costing

An accounting method that considers only variable production costs (costs that change with the level of output) in the calculation of product costs.

Unit Product Cost

The total cost associated with producing one unit of a product, including both variable and fixed costs.