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

question 14

Multiple Choice

Suppose that the 1-year forward rate of dollar per pound is $1.32,the current spot rate $/pound is $1.20,and the expected future spot rate $/pound is $1.40.The forward premium on the pound is:

• A) -6.7%
• B) 5.7%
• C) 10%
• D) 16.7%

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Definitions:

Variable Interest

An interest rate that can fluctuate over time, often based on a standard financial index, in contrast to a fixed interest rate.

Revised Article 3

Refers to the updated section of the Uniform Commercial Code (UCC) that governs negotiable instruments, including the processes for issuing, transferring, and enforcing such documents.

Negotiable

Capable of being transferred or endorsed from one party to another in accordance with the law, generally referring to legal documents like checks.

Negotiable

Refers to the quality of a document or instrument that can be transferred or assigned from one party to another as a form of payment or financial instrument.