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.

---

Definitions:

Conifers

A group of cone-bearing seed plants, predominantly evergreens, that includes pines, spruces, and firs, among others.

Herbivores

Organisms that feed exclusively or mostly on plant matter.

Intense Sunlight

A condition characterized by strong, direct sunlight with a high level of ultraviolet radiation, often leading to increased temperature and potential for sunburn.

Spongy Mesophyll

The loosely arranged mesophyll cells near the lower epidermis in certain leaves. Compare with palisade mesophyll.