If an investor can obtain more of a foreign currency for a dollar in the forward market than in the spot market,then the foreign currency is said to be selling at a discount to the spot rate.

Question

Quizplus · Accepted Answer

When the forward exchange rate for a foreign currency is higher than the spot exchange rate, it implies that the foreign currency is selling at a discount to the spot rate. This is because the investor can buy the foreign currency at a cheaper rate in the forward market than in the spot market.

If an Investor Can Obtain More of a Foreign Currency