When a currency trades at a premium in the forward

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89. When a currency trades at a premium in the forward market A. The exchange rate is more than one dollar (e.g. €1.00 = $1.28) B. The exchange rate is less than one dollar C. The forward rate is less than the spot rate D. The forward rate is more than the spot rate. 90. When a currency trades at a discount in the forward market A. The forward rate is less than the spot rate B. The forward rate is more than the spot rate. C. The forward exchange rate is less than one dollar (e.g. €1.00 = $0.928) D. The exchange rate is less than it was yesterday 91. The SF/$ spot exchange rate is SF1.25/$ and the 180 day forward exchange rate is SF1.30/$. The forward premium (discount) is: A. The dollar is trading at an 8% premium to the Swiss franc for delivery in 180 days. B. The dollar is trading at a 4% premium to the Swiss franc for delivery in 180 days. C. The dollar is trading at an 8% discount to the Swiss franc for delivery in 180 days. D. The dollar is trading at a 4% discount to the Swiss franc for delivery in 180 days. If you're curious about the premium or discount thing, notice that your dollar-denominated holding period return is negative for someone who buys at the spot and sells at the forward: 92. The €/$ spot exchange rate is $1.50/€ and the 120 day forward exchange rate is 1.45/€ The forward premium (discount) is: A. The dollar is trading at an 8% premium to the euro for delivery in 120 days. B. The dollar is trading at a 5% premium to the Swiss franc for delivery in 120 days. C. The dollar is trading at a 10% discount to the euro for delivery in 120 days. D. The dollar is trading at a 5% discount to the euro for delivery in 120 days. 5-65
Chapter 05 The Market for Foreign Exchange 93. The €/$ spot exchange rate is $1.50/€ and the 90-day forward premium is 10 percent. Find the 90-day forward price A. $1.65/€ B. $1.5375/€ C. $1.9125/€ D. None of the above 94. The SF/$ spot exchange rate is SF1.25/$ and the 180 forward premium is 8 percent. What is the outright 180 day forward exchange rate? A. SF1.30/$ B. SF1.35/$ C. SF6.25/$ D. None of the above 95. The SF/$ 180-day forward exchange rate is SF1.30/$ and the 180 forward premium is 8 percent. What is the outright spot exchange rate? A. SF1.30/$ B. SF1.35/$ C. SF1.25/$ D. None of the above 5-66
Chapter 05 The Market for Foreign Exchange 96. (p. 128) Consider the following spot and forward rate quotations for the Swiss franc: A. Which of the following is true: B. The Swiss franc is definitely going to be worth more dollars in six months. C. The Swiss franc is probably going to be worth less in dollars in six months D. The Swiss franc is trading at a forward discount. E. The Swiss franc is trading at a forward premium. The euro is trading at a forward premium. See page 128.The euro could be worth more or less in six months. Forward rates give us a good guess, but not a definitive guarantee of market conditions in six months.

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