Which of the following statement is correct? Select one: a. When the markets are

Question

Which of the following statement is correct?

Select one:

a. When the markets are imperfect, risk-adjusted expected returns on goods and services in different markets should be equal to required return.

b. All the answers are incorrect.

c. To forecast future exchange rates, the technical analysis examines macroeconomic variables such as relative inflation and interest rates, national income growth, and changes in money supplies.

d. A forward premium exists if the forward rate is above the spot rate.

e. A $1.08 must be repaid in one year for $1.008 loaned today if the nominal interest rate is 8% on a one-year loan.

Explanation / Answer

d. A forward premium exists if the forward rate is above the spot rate
If the forward rate is more than the spot rate a premium exists for that currency.

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