Differences in the Spot Exchange Rate and the 30-Day Forward

question 72

Multiple Choice

Differences in the spot exchange rate and the 30-day forward rate are normal and reflect the expectations of the foreign exchange market about

• A) anticipated currency swap rates.
• B) stability in the global marketplace.
• C) future currency movements.
• D) the carry trades that will occur.

---

Definitions:

Exchange Rate

The price of one country's currency expressed in another country's currency.

Purchasing-Power Ratio

The relative value of two currencies in terms of their ability to purchase a specific set of goods and services.

Stock Beta

A measure of a stock's volatility in relation to the overall market; it indicates how much the stock's price is likely to move compared to market fluctuations.

Business Cycle

The natural rise and fall of economic growth that occurs over time, consisting of periods of expansion, peak, contraction, and trough.