The Spot Rate on the Dutch Guilder Is $0

question 35

Multiple Choice

The spot rate on the Dutch guilder is $0.39 and the 180?day forward rate is $0.40. The difference between the spot and forward rates means that

• A) interest rates are higher in the U.S. than in the Netherlands
• B) the guilder has risen in relation to the dollar
• C) the inflation rate in the Netherlands is declining
• D) the guilder is expected to fall in value relative to the dollar there is a high inflation rate in the U.S.

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