In theory,the foreign exchange futures price is based on four parameters only,the spot foreign exchange rate,the risk-free rate in the domestic currency,the risk-free rate in the foreign currency,and time to maturity.

Question

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The foreign exchange futures price is determined by the spot foreign exchange rate, the applicable interest rates in both currencies, and the time to maturity. These factors are used to calculate the expected future value of the currency pair, which is then priced into the futures contract.

In Theory,the Foreign Exchange Futures Price Is Based on Four