The Difference Between the Spot Rate and the Forward Rate

question 65

Multiple Choice

The difference between the spot rate and the forward rate quotation is the:

• A) exchange rate arbitrage.
• B) forward points.
• C) interest rate parity.
• D) indirect exchange rate.

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Definitions:

Cost of Goods Sold

Direct costs attributable to the production of goods sold by a company, including material, labor, and manufacturing overhead expenses.

Ending Inventory

Merchandise value ready for sale at the close of an accounting cycle.

Consistency Principle

An accounting standard that mandates entities to apply the same accounting methods and practices from period to period.

Expense Recognition Principle

This principle dictates that expenses should be recognized in the accounting period when they are incurred, not necessarily when they are paid, matching expenses to the revenues they help generate.