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

question 50

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 risk premium on the pound is:

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

Identify the relationship between the demand for goods and services (final demand) and the demand for resources (derived demand).

Analyze the effects of wage rate changes on the employment of labor and resource demand.

Understand the optimum resource mix for a firm and how it is determined.

Examine the influence of productivity and the price of final products on resource demand.

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Definitions:

Expected Return

The anticipated amount of profit or loss an investment generates over a given period of time.

Defined Benefit Plan

A type of pension plan where the employer guarantees a specified pension payment upon retirement, based on the employee's earnings history, tenure of service, and age, rather than directly depending on individual investment returns.

Noncontributory Plan

A type of pension plan or benefit program where the employer fully funds the benefits without required contributions from the employees.

Pension Reform Act

Legislation aimed at improving, modifying, or reforming the guidelines and operations of pension schemes and retirement benefits.