For a USTrader Working in American Quotes,if the Forward Price Is Higher

question 19

Multiple Choice

For a U.S.trader working in American quotes,if the forward price is higher than the spot price

• A)the currency is trading at a premium in the forward market.
• B)the currency is trading at a discount in the forward market.
• C)then you should buy at the spot,hold on to it and sell at the forward-it's a built-in arbitrage.
• D)All of the options-it really depends if you're talking American or European quotes.

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Definitions:

Total Cost Function

The total cost function is a mathematical representation that shows how total costs of production vary with changes in output level.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Marginal Costs

The increase in cost due to the production of one further unit of a product or service.

Total Cost Function

An equation that shows the overall cost incurred by a firm in the production process, including both fixed and variable costs, as a function of the quantity of output produced.