The forward points are calculated using:
A) The level of interest rates in the base currency
B) The level of interest rates in the quoted currency
C) The interest rates in the two currencies
D) Your expectations of the future spot rate

Question

Quizplus · Accepted Answer

The forward points are calculated based on the difference between the interest rates in the two currencies being traded. This difference in interest rates reflects the cost of borrowing one currency to buy another, and is therefore used to determine the forward exchange rate. The other options may affect the determination of the forward exchange rate, but they are not directly used in calculating the forward points.

The Forward Points Are Calculated Using