If a foreign country's interest rate is similar to the U.S. rate, the forward rate premium or discount will be ____, meaning that the forward rate and the spot rate will provide ____ forecasts.
A) substantial; similar
B) substantial; very different
C) close to zero; similar
D) close to zero; very different

Question

If a foreign country's interest rate is similar to the U.S. rate, the forward rate premium or discount will be ____, meaning that the forward rate and the spot rate will provide ____ forecasts.​
A) ​substantial; similar
B) ​substantial; very different
C) ​close to zero; similar
D) ​close to zero; very different

Quizplus · Accepted Answer

If the foreign country's interest rate is similar to the U.S. rate, the forward rate premium or discount will be close to zero, which means that the forward rate and the spot rate will provide similar forecasts.

If a Foreign Country's Interest Rate Is Similar to the U.S