The spot rate of exchange between the U.S. dollar and the euro is 1.35 (dollar/euro) and the three-month forward rate of exchange is 1.29.

Question

Quizplus · Accepted Answer

The euro is selling at a discount because the forward rate (1.29) is less than the spot rate (1.35), indicating it will be cheaper in the future. The standard forward discount can be calculated as $((Spot rate - Forward rate) / Forward rate) \times 100 = ((1.35 - 1.29) / 1.29) \times 100 = 4.65\%$, but the correct calculation was not provided in the options, indicating a possible mistake in the question or in the interpretation of the options. However, based on the given options, B is the closest to indicating the euro is at a discount, although the percentage provided is incorrect.

The Spot Rate of Exchange Between the U