Which of the following is true of forward and spot rates?
A) The premium or discount is usually 7-10%.
B) Spot and forward transactions generally occur on the organized exchange.
C) The length of a forward and spot contract is generally between zero and six months.
D) Both the forward and spot rate occur in the over-the-counter market.

Question

Quizplus · Accepted Answer

Both forward and spot rates occur in the over-the-counter market, meaning they are traded directly between two parties rather than on an organized exchange. The premium or discount on a forward rate can vary widely depending on market conditions and expectations, so option A is not accurate. The length of a forward contract is not restricted to zero to six months and can be much longer, so option C is also not accurate.

Which of the Following Is True of Forward and Spot