What Can Be Said About the Spot Exchange Rate of Dollars

question 23

Multiple Choice

What can be said about the spot exchange rate of dollars for pounds if nominal interest rates are higher in the United States than in the United Kingdom?

• A) It should exceed the forward rate of dollars for pounds.
• B) It should be less than the forward rate of dollars for pounds.
• C) It is expected to increase.
• D) It is expected to remain constant.

---

Definitions:

Risky Companies

Businesses that operate in highly volatile sectors or have financial uncertainties making their investments considered higher risk.

Higher Rated Firms

Companies that have been given a superior evaluation or credit rating by rating agencies, indicating financial health and stability.

Tender Offer

A public and open offer, often by a company, to purchase a significant portion of its own shares or those of another company at a specified price, which is usually at a premium to the market price.

In Play

A company is in play when it is the object of an acquisition attempt.