Assume That the Forward Rate Is Used to Forecast the Spot

question 29

Multiple Choice

Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6 percent 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.

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Definitions:

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product for which every seller’s offering is identical.

Economic Difference

The disparity in wealth, income, and living standards between different economies or within sectors of the same economy.

Perfectly Competitive

A market structure characterized by many buyers and sellers, where each has negligible influence on the market price of homogeneous products.

U.S. Airline Industry

A sector that encompasses all airlines operating within the United States, including domestic and international carriers.