The expected rate of currency depreciation is equal to the proportional difference between the forward rate and the spot rate. This is known as the:
A) forward depreciation.
B) backward depreciation.
C) forward premium.
D) backward premium.

Question

Quizplus · Accepted Answer

The expected rate of currency depreciation is calculated by subtracting the spot rate from the forward rate and dividing the result by the spot rate. If the result is positive, then it is considered a forward premium. Therefore, the answer is C, forward premium.

The Expected Rate of Currency Depreciation Is Equal to the Proportional