The forward foreign exchange rate

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Reference no: EM132036627

1. Consider an oil swap in which you pay the floating price of oil in exchange for a fixed amount A. The price of a new oil swap (i.e., the breakeven value A) increases when

A. The spot price of the commodity declines.

B. The convenience yield on the commodity increases.

C. Interest rates rise.

D. All of the above.

2. The forward foreign exchange rate

A. Determines the future spot exchange rate.

B. Is unaffected by changes in interest rates.

C. Is the ratio of equivalent spot amounts in each currency compounded to the forward maturity at the respective currencies' spot rates.

D. Is the rate that ensures that future expected purchasing power will be in parity.

Reference no: EM132036627

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