If the Spot Rate Is AUD/USD 0

question 27

Multiple Choice

If the spot rate is AUD/USD 0.5526-0.5531 and the 90-day forward rate is AUD/USD 0.5578-0.5588,the AUD is trading at a/an:

• A) expected gain.
• B) premium.
• C) reciprocal.
• D) discount.

Apply knowledge of probability distributions to interpret and perform calculations regarding real-life scenarios.

Understand the concept of probability in the context of random sampling and its calculation in different scenarios.

Comprehend the role of the normal distribution in statistical analysis and its properties.

Grasp the concept of z-scores and their application in determining probabilities within a normal distribution.

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Definitions:

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to purchase insurance or contracts than low-risk ones.

Auto Transmission

An automatic transmission is a type of motor vehicle transmission that can automatically change gear ratios as the vehicle moves, freeing the driver from having to manually shift gears.

Moral Hazard

The situation where one party engages in risky behavior knowing that it is protected against the consequences of that behavior, often because another party will bear those consequences.

Asymmetric Information

A situation where one party in a transaction has more or superior information compared to another, often leading to an imbalance in the transaction.