As a Rule, When the Interest Rate of the Foreign

question 27

Multiple Choice

As a rule, when the interest rate of the foreign currency is greater than the interest rate of the quoting currency,

• A)the outright forward rate is less than the spot exchange rate.
• B)the outright forward rate is more than the spot exchange rate.
• C)the currency will trade at a premium in the forward contract.
• D)none of the above

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Definitions:

Output

The total amount of goods or services produced by a company, industry, or economy.

Perfect Competitor

A hypothetical market structure in which no individual firm has any market power, allowing for an ideal level of competition where prices reflect actual costs.

Imperfect Competitor

A market participant who does not meet the conditions of perfect competition, often having some control over the price of its product or service.

MRP Schedule

A table showing the marginal revenue product (MRP) which is the additional revenue generated from using one more unit of a resource.