Assume the Spot Rate of a Currency Is £0

question 86

Multiple Choice

Assume the spot rate of a currency is £0.67 and the 360-day forward rate is £0.63. The forward rate of this currency exhibits a ____ of ____ on an annualized basis.

• A) discount; 5.97%
• B) premium; 6.35%
• C) premium; 5.97%
• D) discount; 6.35%

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Definitions:

Debits and Credits

Debits and credits are the fundamental components of accounting, representing increase or decrease in accounts to record transactions in double-entry bookkeeping.

Financial Statements

Summarized records of a company's financial activities, including the balance sheet, income statement, and cash flow statement, presented over a specific period.

Adjusting Entry

An entry recorded in the books at the period's end to assign earnings and outlays to the correct period.

Liability Account

An accounting record that reflects the amounts a company owes to others, such as loans payable, accounts payable, bonds payable, etc.