A forward transaction involves an agreement today to buy or sell a specified amount of a foreign currency at the forward rate. ()
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If the forward rate is above the present spot rate, the foreign currency is said to be at a forward discount with respect to the domestic currency. ()
If the positive interest rate differential in favor of a foreign monetary center is 4 percent per year and the foreign currency is at a forward discount of 3 percent per year, roughly how much would an interest arbitrageur earn from the purchases of foreign three-month treasure bills if he or she covered the foreign exchange risk? ( )
A. 4%
B. 3%
C. 1%
D. 7%
The foreign exchange market is the market in which individuals, firms, and banks buy and sell foreign currencies or foreign exchange. ()
For a small nation ( )
A. the foreign supply of exports is horizontal
B. the domestic demand for imports is horizontal
C. the foreign supply for imports is horizontal
D. the foreign supply of exports is vertical