circle the correct answer

1) The forward rate is indirectly affected by all the factors that influence the spot rate (S) over time, including ------------------- and -------------------------.

a.

interest rate differentials only

b.

inflation differentials and interest rate differentials.

c.

forward rate differentials.

d.

inflation differentials only

2) When currency A appreciates against the dollar by a greater degree than currency B, then currency ---------------- against B.

a.

depreciates

b.

appreciates

c.

depreciates or appreciates

d.

no change