Suppose the Spot Exchange Rate Is $1 = £

question 51

Multiple Choice

Suppose the spot exchange rate is $1 = £.7304 and the 1-month forward rate is $1 = £.7303.Given this,you know the:

• A)U.S.inflation rate is higher than the U.K.'s.
• B)U.S.nominal interest rate is higher than the U.K.'s.
• C)pound is selling at a discount.
• D)U.S.real risk-free interest rate is higher than the U.K.'s.
• E)pound is selling at a premium.

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Definitions:

Sample Value

A single observation or measurement taken from a larger set of data, known as a sample.

Significant Difference

A statistical assessment that shows that the observed results in a study were unlikely to have occurred by chance.

Standard Error

The standard deviation of the sampling distribution of a statistic, typically used to measure the accuracy of sample mean estimates.

Population Standard Deviation

A statistic that measures the dispersion or spread of a set of data points in a population.