If a Forward Discount Is Prevalent in U

question 102

Multiple Choice

If a forward discount is prevalent in U.S. dollars to Swiss francs,

• A) the forward rate is lower than the spot rate.
• B) the forward rate is higher than the spot rate.
• C) markets will expect the Swiss Franc to appreciate relative to the dollar.
• D) the forward rate is lower than the spot rate and markets expect the Swiss franc to appreciate relative to the dollar.

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Definitions:

Interest Payments

The regular payments made by a borrower to a lender as compensation for the use of borrowed money, usually calculated as a percentage of the outstanding principal.

CCA Class

In the context of Canadian taxation, refers to the categorization of depreciable property for the purpose of calculating capital cost allowance (tax deductions for depreciation).

Manufacturing Costs

Expenses directly related to the production of goods, including raw materials, labor, and factory overhead.

Tax Rate

The rate at which income is taxed for a person or business entity.