Ask Question
8 January, 04:20

Let RUS be the annual risk free rate in the United States, RUK be the risk free rate in the United Kingdom, F be the futures price of $/BP for a 1-year contract, and E the spot exchange rate of $/BP. Which one of the following is true?

A. if RUS > RUK, then E > F

B. if RUS < RUK, then E < F

C. if RUS > RUK, then E < F

D. if RUS < RUK, then F = E E.

There is no consistent relationship that can be predicted.

+4
Answers (1)
  1. 8 January, 04:33
    0
    If RUS > RUK, then E < F (C)

    Explanation:

    RUS = annual risk free rate in united states

    RUK = annual risk free rate in United kingdom

    F = futures price of $/BP for 1 year

    E = spot exchange rate for $/BP

    To get a higher the future price

    this conditions must be met

    The annual risk free rate of the united states must be higher than the annual risk free rate of the united kingdom. if this condition is met then the the British pound will have a forward premium (F) > (E)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Let RUS be the annual risk free rate in the United States, RUK be the risk free rate in the United Kingdom, F be the futures price of $/BP ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers