If a dollar will buy fewer units of a foreign currency in the forward market than in the spot market, then the forward currency is said to be selling at a premium to the spot rate.

Question

Quizplus · Accepted Answer

When a currency is selling at a premium in the forward market, it means that the forward rate is higher than the spot rate, indicating that the foreign currency is more expensive in the future compared to the current market price. This means that a dollar will buy fewer units of the foreign currency in the future, hence the currency is said to be selling at a premium to the spot rate.

If a Dollar Will Buy Fewer Units of a Foreign