A Forward Rate Prevailing from Period Three Through to Period

question 72

Multiple Choice

A forward rate prevailing from period three through to period four can be:

• A) readily observed in the market place.
• B) extracted from high coupon bonds.
• C) extracted from spot rates with 2 and 3 year maturities.
• D) extracted from spot rates with 3 and 4 years to maturity.

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Definitions:

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another currency.

Net Exports

The gap between what a country earns from exports and spends on imports.

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents over a specified period.

Marginal Product

The increase in output that arises from an additional unit of input.