One question says, if the forward exchange rate is above the spot exchange rate, Interest rates are relatively low can someone explain this?
If the forward exchange rate is above the spot exchange rate, then the risk-free rate on the base currency is lower than the risk-free rate on the price currency.
That’s a lot different than saying, broadly, that interest rates are relatively low.
If the question (or the proffered explanation for the proposed correct answer) says that interest rate_ s _ (in general) are relatively low, it’s wrong.
Thanks for the explanation. I’m guessing relatively low means low compared to the price currency?
Probably.