Suppose That the Spot Exchange Rate for a Foreign Currency

question 30

Essay

Suppose that the spot exchange rate for a foreign currency is equal to $120,while the interest rate in dollars is 2% and the interest rate in the foreign currency is 3%.What is the approximate forward rate that is consistent with this situation?
A)$115.56
B)$124.44
C)$118.77
D)None of the above.

• A)$115.56
• B)$124.44
• C)$118.77
• D)None of the above.

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Definitions:

Contribution Margin

The amount by which a product's selling price exceeds its total variable costs, indicating how much contributes to covering fixed costs and generating profit.

Dollar Amount

A specific value of money in terms of the currency of the United States, expressed in dollars.

Investment Center

A division or unit within a company that is responsible for its own revenues, expenses, and assets, and its performance is evaluated on its return on investment.

Generates Revenue

Activities or processes that result in the earning of income for a business through the sale of goods or services.