Consider the Following Spot and Forward Rate Quotations for the Swiss

question 1

Multiple Choice

Consider the following spot and forward rate quotations for the Swiss franc. S($/SFr) = 0.85
F₁($/SFr) = 0.86
F₂($/SFr) = 0.87
F₃($/SFr) =0.88
Which of the following is true?

• A)The Swiss franc is definitely going to be worth more dollars in six months.
• B)The Swiss franc is probably going to be worth less in dollars in six months.
• C)The Swiss franc is trading at a forward discount.
• D)The Swiss franc is trading at a forward premium.

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Definitions:

Extinction

The gradual weakening and eventual disappearance of a conditioned response when the reinforcement is no longer presented.

Conditioned Stimulus

A stimulus that initially has no inherent significance but acquires the ability to evoke a response after being associated with an unconditioned stimulus.

Stimulus Discrimination

The ability to distinguish between one particular stimulus and similar stimuli, not responding the same way to variations of the original stimulus.

Conditioned Stimulus

A neutral stimulus that, once it becomes linked with an unconditioned stimulus, ultimately leads to eliciting a conditioned response.