Given the 3 month forward rate exchange between the USA and Switzerland is USD/CHF 1.1589 this suggests:
A) that interest rates in the USA are higher than in Switzerland.
B) the 3 month forward rate is at a premium.
C) that interest rates in the USA are lower than in Switzerland.
D) a person requires more data before making a conclusion.

Question

Quizplus · Accepted Answer

A higher forward rate indicates that the currency of the country with lower interest rates is expected to depreciate relative to the currency of the country with higher interest rates. In this case, since the forward rate is USD/CHF 1.1589, it suggests that the market expects the Swiss franc to appreciate relative to the US dollar over the next three months, which means that interest rates in Switzerland are expected to be higher than in the US.

Given the 3 Month Forward Rate Exchange Between the USA