Suppose That the 1-Year Forward Rate of Dollar Per Swiss

question 4

Multiple Choice

Suppose that the 1-year forward rate of dollar per Swiss franc is $0.42,the current spot rate $/SFr is $0.40,and the expected future spot rate $/SFr is $0.45.The risk premium equals to:

• A) - 7.5%
• B) 5%
• C) 6.67%
• D) 12.5%

Understand the concept of utility maximization given a budget constraint.

Analyze the effects of changing prices on consumer's choice between two goods.

Comprehend the relation between the marginal rate of substitution (MRS) and the ratio of prices of goods.

Recognize different types of utility functions and their implications for consumer choice.

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