Assume that the Euro is selling in the spot market for $1.10. Simultaneously, in the 3-month forward market the Euro is selling for $1.12. Which one of the following statements correctly describes this situation?
A) The spot market is out of equilibrium.
B) The forward market is out of equilibrium.
C) The dollar is selling at a premium relative to the Euro.
D) The Euro is selling at a premium relative to the dollar.
E) None of the other four statements correctly describes this situation.
Correct Answer:
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