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Question
Suppose that the one-year U.S. interest rate is 5% and the equivalent one-year Swiss interest rate is 4%. According to the covered interest rate parity, there is a ________ on the Swiss franc.
a. 1% forward discount
b. 1% forward premium
c. 9% forward discount
d. Forward flat
Answer
This answer is hidden. It contains 1 characters.
Related questions
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Risk premium equals to:a. expected premium minus forward premium.b. expected premium plus forward premium.c. forward premium minus expected premium.d. exchange rate premium plus forward premium.
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The equivalence of the exchange rate to the ratio of price levels between two countries is referred to as the:
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Q:
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Q:
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Under the flexible exchange rate regime, which of the following variables in the monetary approach becomes zero and is dropped out of the equation?
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Considering the internal balance in an economy, which of the following could lead to lower interest rate and higher income?
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In foreign exchange forecasting, what is a good forecast?
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c. When the forecast is high.
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Suppose for two currencies the forward premium is 8.5% and the expected premium is 5%. Then the risk premium is:
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The ________ in the forward exchange market is equal to the effective return differential.
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Q:
Information exposure is a type of foreign exchange risk.
Q:
Suppose for two currencies the forward premium is 4% and the expected premium is 8%. Then the risk premium is:
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Q:
A U.S. firm has a 1 million payment due to a Dutch firm in 90 days. The current spot rate is $1.00 per euro, and the 90-day forward rate is $1.11. Ben forecasts that the spot rate in 90 days will be $0.99. Jerry forecasts that the spot rate will be $1.12 in 90 days. The actual spot rate in 90 days turns out to be $1.10. Whose advice, between Ben and Jerry, will save the companys money?
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Q:
Suppose that the 1-year forward rate of dollar per Swiss franc is $0.42, the current spot rate ($/SFr) is $0.40, and the expected future spot rate ($/SFr) is $0.45. The forward premium equals to:
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c. 6.67%
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