Assuming the 30-day forward exchange rate were $1 = ¥130 and the spot exchange rate were $1 = ¥120, the dollar is selling at a _____ on the 30-day forward market.

Question

Quizplus · Accepted Answer

If the 30-day forward exchange rate is higher than the spot exchange rate, it means that the foreign currency (in this case, the yen) is more expensive in the future than it is currently. This indicates that the market expects the yen to appreciate against the dollar over the next 30 days. Therefore, the dollar is selling at a premium on the 30-day forward market.

Assuming the 30-Day Forward Exchange Rate Were $1 = ¥130