Question

Question 9 (1 point)

Suppose that on January 1, 1987, the spot rate on the Dutch guilder was $0.39 and the 180day forward rate was $0.40. The difference between the spot and forward rates suggested that

Question 9 options:

	a) the guilder had risen in relation to the dollar
	b) the inflation rate in the Netherlands was declining
	c) interest rates were higher in the U.S. than in the Netherlands
	d) the guilder was expected to fall in value relative to the dollar

Question 10 (1 point)

The direct spot quote for the Canadian dollar is $.76 and the 180day forward rate is $.74. The difference between the two rates is likely to mean that

Question 10 options:

	a) interest rates are rising faster in Canada than in the U.S.
	b) the Canadian dollar's spot rate is expected to rise in terms of the U.S. dollar
	c) prices in Canada are expected to rise more rapidly than in the U.S.
	d) inflation in the U.S. during the past year was lower than in Canada

Answer 1

Solution. Questing. cf Interest rate were righer in the us than in the Netherlands. 99 Question 10 cq price in Canada Canada are expected to rise more rapidly than in the U.S. Explanation. & ace according to Interest rate parity spot Dutch guilder was $0.39 forward so days = $0.40 on Dutch guider. Since Dutch guilder is at forward premium, Dutch guilder interest rate should be lowl. So the current option is Into rate were higher in the ass than in the Netherlane Q10 spot rate of Gent conte canadian dollar is $. 76 2087.76 forward 180 days rau 8.74 Since forward price is lower price in canada are expected to rise more rapidly than in the is epi B = .74