Use the following graph to answer questions 23-24.
Figure 6.1: Yield Curves
-Refer to Figure 6.1.At 3-month maturity,the U.S.dollar sells at a forward ______ and the Korean won sells at a forward _______.

Question

Use the following graph to answer questions 23-24.
Figure 6.1: Yield Curves 
-Refer to Figure 6.1.At 3-month maturity,the U.S.dollar sells at a forward ______ and the Korean won sells at a forward _______.

Quizplus · Accepted Answer

In foreign exchange, if a currency is trading at a forward premium, it means that the forward exchange rate is higher than the current spot rate, indicating that the currency is expected to appreciate in value. Conversely, a forward discount means the forward rate is lower than the spot rate, indicating an expectation that the currency will depreciate. The question implies a comparison between the U.S. dollar and the Korean won at a 3-month maturity. Without specific figures, the general principle is that if one currency is at a forward premium, the other is at a discount when compared directly, as forward rates reflect expectations of relative currency movements.

Use the Following Graph to Answer Questions 23-24