If a foreign currency is quoted in American terms (the direct quote)and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________.
A)forward premium
B)backward discount
C)backward premium
D)forward discount

Question

Quizplus · Accepted Answer

If the forward rate for a foreign currency is less than the spot rate and the currency is quoted in American terms, it means that the foreign currency is selling at a forward discount. This is because the forward rate represents the expected future exchange rate, and if it is lower than the current spot rate, it implies that the market expects the foreign currency to depreciate in the future relative to the dollar.

If a Foreign Currency Is Quoted in American Terms (The