If the Spot Rate Is USD/CAN1

question 120

Multiple Choice

If the spot rate is USD/CAN1.67 and the 1-month forward rate is USD/CAN1.70:

• A)the Canadian dollar is trading at a forward premium
• B)the Canadian dollar is trading at a forward discount
• C)the US dollar is trading at a forward discount
• D)the US dollar is trading at a forward premium
• E)the USD is at a forward premium and the CAN is at a forward discount.

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Definitions:

Total Cost Concept

The total cost concept is an approach in economics and accounting that considers all costs related to the production and delivery of a product or service, including fixed, variable, and indirect costs.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.

Markup Percentage

The fraction applied on top of the buying price of products to include expenses for overhead and yield a profit.

Markup Percentage

The percentage by which the cost of a product is increased to determine its selling price.