Singapore dollar is selling at the spot rate of 1.62 SS/USS, and at a 6-month fo

Question

Singapore dollar is selling at the spot rate of 1.62 SS/USS, and at a 6-month forward rate of 1.55 ss/uSS. As the financial manager of a Singaporean multi-national firm buying US high-tech products, you need to find out the forward premium or discount on the Select one: A premium of 8.6% b, A discount of 8.6% C, A discount of 9% d, A premium of 4.5% e. A premium of 9% f. A discount of 4.5% O The theory that advocates each nation should specialize in efficiett production of its specialties, and import the rest is Select one: oa. the theory of linear optimization O b. none of the choices is correct c. the theory of comparative advantage d. the theory of product cycle e. the theory of imperfect market

Explanation / Answer

1) Answer: f.A discount of 4.5% Because (1.55 - 1.62) / 1.62 = -4.5% (ie. Discount of 4.5%) 2) Answer : c. the theory of comparative advantage As per theory, every country should produce its specialization in the production and go for import of in which no specialisation exists.

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