A forward rate for a currency is said to exhibit a discount if:
A)the forward rate exceeds the existing spot rate.
B)the forward rate is less than the existing spot rate.
C)the forward rate exceeds the expected future spot rate.
D)the forward rate is less than the expected future spot rate.
E)none of the above

Question

A forward rate for a currency is said to exhibit a discount if:​
A)the forward rate exceeds the existing spot rate.
B)the forward rate is less than the existing spot rate.
C)the forward rate exceeds the expected future spot rate.
D)the forward rate is less than the expected future spot rate.
E)none of the above

Quizplus · Accepted Answer

A forward rate exhibits a discount when it is less than the existing spot rate, meaning investors can buy the currency at a cheaper rate in the forward market compared to the current spot market. This implies that the market expects the currency to depreciate in the future.

A Forward Rate for a Currency Is Said to Exhibit