A Forward Rate for a Currency Is Said to Exhibit

question 78

Multiple Choice

A forward rate for a currency is said to exhibit a discount if

• A) the forward rate exceeds the existing spot rate.
• B) the forward rate is less than the existing spot rate.
• C) the forward rate exceeds the expected future spot rate.
• D) the forward rate is less than the expected future spot rate.
• E) none of the above

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Definitions:

Income

Compensation acquired from job employment or the act of investing, usually in a regular pattern.

Price

The expected financial outlay, required, or dispensed in payment for something.

Claret

A red wine from Bordeaux, France, or a wine of similar character from elsewhere.

Demand Function

A mathematical representation of the relationship between the quantity demanded of a good and its determining factors, such as price and consumer income.