Suppose for Two Currencies the Forward Premium Is 8

question 7

Multiple Choice

Suppose for two currencies the forward premium is 8.5% and the expected premium is 5%.Then the risk premium is:

• A) -13.5%
• B) -3.5%
• C) 3.5%
• D) 13.5%

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Definitions:

Mutual Mistake

A contract law principle where all parties have a common but incorrect belief about a material fact, which can void the agreement.

Duty of Disclosure

The legal obligation to provide all relevant information in a transaction or legal proceeding, ensuring fairness and transparency.

Salesperson and Customer

The dynamic relationship between an individual who sells goods or services and the individual or entity purchasing them, emphasizing the communication and transaction between these parties.

Business Partners

Individuals or entities who collaborate and share the risks and profits of a business venture.