Which one of the following statements is the MOST accurate?
A) Spot exchange rates are always higher than forward exchange rates.
B) Spot exchange rates are always lower than forward exchange rates.
C) Spot exchange rates and forward exchange rates are always equal.
D) Spot exchange rates and forward exchange rates are equal when the value date and the date of the spot transaction are the same.
E) Spot exchange rates and forward exchange rates never move closely together.

Question

Quizplus · Accepted Answer

Spot exchange rates (the exchange rate for immediate delivery of a foreign currency) and forward exchange rates (the exchange rate for future delivery of a foreign currency) can differ due to factors such as interest rates and market expectations. However, if the value date and date of the spot transaction are the same, then the rates will be equal. Therefore, D is the most accurate statement.

Which One of the Following Statements Is the MOST Accurate