The Spot Rate Exchange Rate for Andromedan Pixels (ANP)is 3

question 56

Multiple Choice

The spot rate exchange rate for Andromedan Pixels (ANP) is 3.00ANP/$.If the risk-free rate of return in Andromeda is 20% per annum while that in the U.S.is 3%,then what should be the 1-year forward rate for ANP/$?

• A) $2.57
• B) $3.00
• C) $3.50
• D) $3.60

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Definitions:

Probability

An indicator of how probable an event is to happen, shown as a value ranging from 0 to 1, with 0 meaning it cannot happen and 1 meaning it will definitely happen.

Union

An organized association of workers formed to protect and further their rights and interests; a labor union.

Individual Probabilities

The likelihood of specific outcomes for individual events.

Probability Tree

A diagram that represents the possible outcomes of a series of events, showing the probability of each outcome in a branching format.