You Checked the €/$ Exchange Rate Today and You Found

question 20

Multiple Choice

You checked the €/$ exchange rate today and you found that one Dollar cost you €0.8214.When you checked the one year €/$ forward exchange rate one dollar was trading at €0.8026.What is the forward premium (discount) for the dollar?

• A) 2.29%
• B) -2.29%
• C) 3.67%
• D) -3.67%

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Definitions:

Diseconomies of Scale

The point at which a company or business grows so large that the costs per unit increase, leading to inefficiency and increased production costs.

Economies of Scale

Cost benefits that organizations acquire by scaling up their operations, wherein the cost for each unit produced tends to fall as the scale of operation enlarges.

Min Per-unit Costs

The lowest possible cost of producing one unit of good or service, achieved through efficient use of resources and optimal production scale.