Assume the euro is selling in the spot market for $1.22.Simultaneously,in the 3-month forward market the euro is selling for $1.24.Which one of these statements correctly describes this situation?

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In the 3-month forward market, the euro is selling for $1.24, which is a higher price than its current spot market price of $1.22. Therefore, the euro is selling at a premium relative to the dollar in the forward market. This situation is reflected in choice D. The spot market might not necessarily be out of equilibrium as the current exchange rate may be based on supply and demand in the market. Similarly, the forward market may not be out of equilibrium as the premium for the euro could be due to factors such as interest rate differentials between the U.S. and the Eurozone. Choice C could be misleading as it implies that the dollar is stronger than the euro, but it's the opposite in this case. Lastly, choice E is incorrect as it suggests that the euro is more expensive in the forward market, whereas it's actually selling at a premium (higher price) compared to its spot market price.

Assume the Euro Is Selling in the Spot Market for $1.22.Simultaneously,in