Assume the current spot price is USD1.62 = GBP1 and the 3-month forward rate is USD1.64 = GBP1.Which one of these statements is correct given these rates?
A) The pound is selling at a forward premium relative to the dollar.
B) The real interest rate in the U.S. is higher than the real rate in the U.K.
C) The dollar is expected to appreciate.
D) The dollar is selling at a forward premium relative to the pound.
Correct Answer:
Verified
Q82: The spot exchange rate for the Canadian
Q83: The spot exchange rate for the British
Q84: You have estimated the cash flows in
Q85: Assume the spot exchange rate for the
Q86: If managers are worried about the political
Q87: One of the drawbacks of using forward
Q88: What is the cost of hedging a
Q89: A US firm has a contractual payment
Q90: The current 1-year nominal interest in the
Q92: If the direct quote for the euro
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents