When the Futures Price Is Above the Forward Rate, Astute

question 8

Multiple Choice

When the futures price is above the forward rate, astute investors may attempt to simultaneously buy a currency forward and sell futures in that currency. These actions would place ____ pressure on the forward rate and ____ pressure on the futures rate.

• A) upward; downward
• B) upward; upward
• C) downward; upward
• D) downward; downward

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Definitions:

Participation

The action of taking part in something, such as an event, activity, or process, often contributing towards a common goal.

Conflict Resolution

The process of resolving disputes, disagreements, or conflicts between parties through negotiation, communication, and problem solving.

Formal Authority

The power or right to give orders, make decisions, and enforce obedience, usually established through a hierarchical structure within an organization.

Forcing

A conflict resolution strategy where one party insists on its position regardless of the impact on others.