Consider the Following What Should Be the Proper Futures Price for a 1-Year

question 22

Multiple Choice

Consider the following: $$\begin{array} { l l } &\text { CF Now }\\\text { Risk-free rate in the United States } & 0.04 / \text { Cear } \\\text { Risk-free rate in Australia } & 0.03 / \text { year } \\\text { Spot exchange rate } & 1.67 \mathrm {~A} \$ / \$\end{array}$$ What should be the proper futures price for a 1-year contract?

• A) 1.703 A$/$
• B) 1.654 A$/$
• C) 1.638 A$/$
• D) 1.778 A$/$
• E) 1.686 A$/$

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Definitions:

Accommodation Party

A person who signs a negotiable instrument on behalf of another, typically to lend their credit without direct benefit.

Negotiable Instrument

A financial document that guarantees payment of a specified amount of money, either on-demand or at a set time, and is transferable from one person to another.

Holder In Due Course

A legal term describing a party who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defects.

Negotiates

The act of discussing something formally to reach an agreement or compromise on terms.