Suppose the Spot Exchange Rate Between U

question 7

Multiple Choice

Suppose the spot exchange rate between U.S.dollars and the U.K.pound is $2/£ while the forward rate is $1.90/£.Which one of the following is true?

• A)The value of the U.K.pound is expected to remain constant.
• B)The U.K.pound is selling at a premium.
• C)The U.K.pound is selling at a discount.
• D)The U.K.pound is expected to appreciate.
• E)The U.S.dollar is expected to depreciate.

Use linear models to predict future outcomes based on given data.

Understand the concept of depreciation and its mathematical representation through linear equations.

Understand the basic concepts and terminology related to financial markets and securities.

Identify different types of financial assets including stocks, bonds, and mutual funds.

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