Spot EUR/USD is 1.3050-53 and EUR interest rates are lower than USD interest rates. Would you expect the forward points for EUR/USD to be:
A) added to spot
B) subtracted from spot
C) a negative value
D) Insufficient information to decide

Question

Quizplus · Accepted Answer

If EUR interest rates are lower than USD interest rates, then the forward points for EUR/USD will be added to spot. This is because the forward rate will be higher than the spot rate in order to compensate for the difference in interest rates.

Spot EUR/USD Is 1