Forward Exchange Rates

question 86

Multiple Choice

Forward exchange rates

• A) reduce uncertainty about future value of currencies.
• B) are always slightly lower than the spot rate.
• C) reflect expectations about the future value of currencies.
• D) both A and C.

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Definitions:

Variable Cost

Expenses that vary depending on the amount of products or services a company generates.

Fixed Costs

Expenses that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums.

Cash Flow

The full measure of money movement into and out of an organization, primarily altering its liquidity status.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows, reflecting the risk and time value of money.