Which of the Following Statements Is Correct

question 21

Multiple Choice

Which of the following statements is correct?

• A)A currency with higher interest rate will sell at a forward discount.
• B)A currency with higher interest rate will sell at a forward premium.
• C)A currency with higher interest rate will have a higher spot rate.
• D)A currency with higher interest rates will have a lower spot rate.

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Definitions:

Value-Weighted Index

An stock index in which each component is weighted according to its market value.

Price-Weighted Index

A stock market index in which each company's stock is included in proportion to its share price, meaning higher-priced stocks have more influence on the index's performance.

Stocks

Financial instruments that represent an ownership share in a corporation, entitling the holder to a proportion of the company's assets and profits, usually traded on stock exchanges.

Outstanding

Outstanding, particularly in context to shares, refers to the total number of shares of a corporation that have been issued and are held by investors, including restricted shares.