Assume That the Forward Rate Is Used to Forecast the Spot

question 82

Multiple Choice

Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% discount. Today's spot rate of the Canadian dollar is $.80. The spot rate forecasted for one year ahead is:

• A) $.860.
• B) $.848.
• C) $.740.
• D) $.752.
• E) none of the above

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Definitions:

Contract

A legally enforceable agreement between two or more parties with mutual obligations.

Paving Streets

The process of covering and constructing roads with materials like asphalt or concrete to create a smooth, durable surface for vehicles and pedestrians.

Property Value

The monetary worth that is assigned to a property, based on factors such as market conditions, location, and the state of the property.

Creditor Beneficiary

A third party that benefits from a contract made between two other parties, wherein the promisee's intention is to provide a benefit to the creditor beneficiary.