The Unbiased Forward Rate Is A

question 7

Multiple Choice

The unbiased forward rate is a:

• A)condition where a future spot rate is equal to the current spot rate.
• B)guarantee of a future spot rate at one point in time.
• C)condition where the spot rate is expected to remain constant over a period of time.
• D)relationship between the future spot rate of two currencies at an equivalent point in time.
• E)predictor of the future spot rate at the equivalent point in time.

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Definitions:

Option Contracts

Financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date.

Swap Contracts

Financial agreements between two parties to exchange cash flows or other financial instruments for a specified period of time.

Put Option

A contract in finance that provides the bearer the privilege, but avoids the necessity, to dispense a specific measure of an underlying asset at a particular price during an outlined period.

Options Contract

A contract giving the buyer the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price on or before a certain date.