Suppose That the One-Year Forward Rate on Pounds Is $1

question 62

Multiple Choice

Suppose that the one-year forward rate on pounds is $1.75£. Given no arbitrage opportunities,this implies that traders expect:

• A) the spot rate to be $1.75£ in one year.
• B) the spot rate to be greater than $1.75£ in one year.
• C) the spot rate to be less than $1.75£ in one year.
• D) the spot rate to be greater than or equal to $1.75£ in one year.
• E) the spot rate to be less than or equal to $1.75£ in one year.

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Definitions:

Note Payable

A written promise to pay a specified amount of money, often with interest, by a certain date.

Common Stock

Shares issued by a corporation representing partial ownership in the company, entitling holders to vote on corporate matters.

Short-Term Investments

Assets of a financial nature forecasted to be liquidated or exchanged for cash within a twelve-month period.

Investing Activities

Investing activities include transactions and events related to the acquisition and disposal of long-term assets and investments not related to the entity's primary business operations.